Gold's at a Premium, and Pawn Shops are Hopping

If you’ve been holding on to that old broken gold chain or that shimmering earring which has long since lost its match, now may be the perfect time to part with those once-loved treasures, as the price of gold has increased to an all-time high of $1,500 an ounce in recent days.

Gold prices have been increasing steadily for the past few years, going from around $800 an ounce to more than $900 between December 2008 and September 2009, then to well over $1,200 an ounce by August of last year, according to an IOL Business Report printed earlier today.

ABC News reported last week that its current going rate of $1,500 an ounce is a record high for the precious metal, whose recent surges come as a result of a combination of factors, from the United States’ increasing debt to fears over how the crisis in Japan will affect the global economy.

Here in South City, local pawn shop Cash Loan, Inc. has seen the effects of gold’s skyrocketing value firsthand. David Newman, whose family has owned the shop in various locations along Grand Avenue for 42 years, said that the increase in the metal’s selling rate has caused an influx of people bringing in their gold jewelry to see what they can get for it.

“We’re getting people who would have never come in before,” he said, explaining that he has seen people coming in who might have previously held onto their broken gold jewelry, but now bring in those pieces to receive more money than they would have just a few years ago. “A chain you might have gotten $300 for three years ago you’ll get $1,000 for today.”

Newman explained that gold follows other markets, so that when the price of oil goes up, often gold markets will see an increase as well. After staying at around $325 an ounce for years, he said that gold has been well over $1,000 an ounce for the past couple years, closing last Friday at $1,507 an ounce.

While silver and some other metals have also increased in value, Newman said that platinum is one that has remained steady, owing to a more stable market and little to no supply changes.

“[Gold and platinum] are actually running about the same now,” Newman said, adding that the price of platinum is at about $1,600 an ounce, where it has been for many years.

In addition to a supply problem, gold’s value has benefitted from platinum’s increased accessibility on the black market. Newman cited catalytic converters as an easily stolen source of platinum on the streets, saying that thieves will steal the piece of equipment off cars and then melt down and sell the platinum in them.

Where gold was once also fairly easy to steal, as it was once used in many computer keyboards, Newman said that changes in how computers are made, namely through the use of gold plating rather than whole pieces, have made the metal harder to steal and thus higher in value.

While Cash Loan, Inc. and other pawn shops are seeing more and more customers looking to get rid of their gold for more money or loans, Newman said that many “cash for gold” companies, which often advertize on television or the internet, have seen business boom as well.

Newman warned that the bigger companies, which generally want customers to mail in their gold, often pay much less than what a consumer could get for their goods at a pawn shop. “We’ll have people come in here and find out they got paid 20% less than they could have right in their own neighborhood,” he said, adding that bigger “cash for gold” buyers often melt down items immediately, and do not offer loan incentives that pawn shops do.

He said that he will often try to convince sellers who come in to take slightly less money to borrow on the item and take out a loan rather than sell immediately, because “once you sell it, it’s gone.”