With demand for gold growing, your jewellery and other gold valuables will be increasing in price. But if you need to free up some cash, should you sell gold for cash or pawn gold temporarily?
If there’s one commodity that’s been on the up and up over the last few years, it has to be gold.
Barely a week goes by without the price of the precious metal hitting a new all-time high. Just this week it hit $1,782.50, about £1,097.34 an ounce – around twice its value just three years ago.
And thanks to fears about the state of the global economy, US debt and the Eurozone crisis, the gold price looks set to continue rising as long as investors keep using gold as a safe haven for their money.
All this is great news for people who have accumulated gold over the years – whether in the form of jewellery, watches, coins or ornaments.
So there’s no surprise that specialist gold-buyers are setting up shop on the high street, the airwaves are filled with online pawnbroker adverts and a glittering array of new websites has appeared to offer you the chance to sell gold for cash.
After all, with household finances being squeezed, more people are taking advantage of high gold prices to convert their valuables into cash. But should you be exchanging your gold for cash or using it to secure a short term loan from a pawnbroker?
We investigate the pros and cons of each method to help you decide.
Selling your gold for cash
This is the traditional way to get cash for your gold – but once it’s sold, it’s sold.
Pros: If you sell gold for cash, you’ll get a great price – and be able to put the cash to use immediately. You can do this by going to specialist gold buyer, a jeweller (many of whom also buy gold) or going online to specialist gold-buying websites.
Cons: The price of gold is likely to climb higher as long as the uncertainty in global financial markets continues, so if you sell now, you might lose out on a better price further down the line. Also, unlike pawning your gold, you’ll never get it back once you’ve exchanged it for cash.
It’s also important for sellers to beware of cash for gold scams – especially if you’re not dealing with someone over the counter. Some unscrupulous buyers might advertise a false rate, or simply take your gold and claim they never received it.
To make sure you don’t fall victim, compare prices from reputable buyers online and always insure any valuables you send out in the mail to protect your investment.
Taking out a loan through an online pawnbroker
Traditionally you’d take your gold to a high street pawnbroker, but with the advent of online pawnbrokers you’re likely to get a much better deal on the web.
Pros: With an online pawnbroker, you can use your gold as collateral to secure a short term cash loan. This allows you to receive cash now while keeping your gold – if you pay back the loan and the interest that’s accrued on it.
So you not only get your hands on the cash you need in the short term, if you retain ownership of the gold you’ll benefit from any future price rises.
What’s more, leading online pawnbrokers like Borro.com employ experts on the gold market and offer free valuations of your gold, with no obligation to take the loan.
Because they’re not buying your gold outright, there’s no incentive to undervalue it – so you can be sure to get a great price and loan for your valuables.
Best of all, if you fail to repay the loan and your gold is sold at auction, you’ll be reimbursed for any extra amount it fetches above what you owe.
Cons: The interest for short term loans from online pawnbrokers is rated monthly – making it relatively expensive unless you pay back the loan quickly. And if gold prices do drop unexpectedly, you could pay more than the market value to redeem the loan and get your item back. (However, if the item doesn’t have sentimental value, this could work in your favour – you could buy a replacement item cheaper!)
If neither selling your gold or raising money on it seems like the best course of action right now, you can always hold onto your gold – but if you do, make sure continuing price rises don’t leave you underinsured.
If you haven’t had your gold valued for a year or two, it will almost certainly be worth more now that when you last arranged your home contents insurance. This means that if you were to lose your gold to disaster or theft, you might not be compensated for its full value.
This is especially true for high net worth households – so if you’re in doubt, get your valuables professionally valued and use an insurance broker to get the right insurance for your needs.
If history is anything to go by, the price of gold can fall just as quickly as it rises, so find out what your collection is worth – if you’re surprised by its value, now might be the best time to make the most of your gold by selling it outright or raising money on it using an online pawnbroker.