Selling gold to a pawnshop: pros and cons
Despite the prejudices of many people regarding pawning gold jewelry, going to a pawnshop has significant advantages, including:
- The ability to receive money in just 15-30 minutes if you have, in fact, jewelry, as well as a passport or driver’s license;
- There is no application to fill out;
- The agreement with the pawnshop can be terminated early, without paying additional interest;
Gold ring with cubic zirconia (go to the SUNLIGHT catalog)
But pawnshops also have their disadvantages:
- If the jewelry is in poor condition or broken, it will be accepted very cheaply (at the price of scrap);
- The conditions for the delivery of gold are such that when pledged, the interest will be significantly higher than on a bank loan;
- The amount received from the pledge will be at your disposal for a short period of time - usually no more than a month.
How to invest in gold. We analyze all the options available to Russians
Shares of gold mining companies
Perhaps this tool optimally combines possible risks and benefits from investments.
The logic is quite simple: there is gold as the main asset and there are companies that mine this gold. When the price of the underlying asset rises, the company's shares also rise. If gold becomes cheaper, then there is also a possibility of a fall in the value of shares, but the company can also always increase sales (if such opportunities exist) and maintain revenue. There is another component to this type of investment - dividends; percentage of net profit that is paid to the owner of shares.
Several securities of companies related to gold mining are traded on the Moscow Exchange. First of all, this is Polyus-Gold (PLZL) . Often the shares are of this kind, that is, they are supposedly as reliable as gold itself. But we must not forget that force majeure events occur in any company, and the shares purchased are not gold bullion, and, accordingly, owning a share of a gold mining company may not protect you from serious shocks in the market.
The dynamics of Polyus Gold (PLZL) are impressive: from November 2021 to November 2021, shares more than doubled from 7,000 to 18,000 rubles. News about the vaccine “dropped” quotes to 15,680 (closing 11/12/2020), but the asset remains quite interesting in the medium term.
(POLY) is a major producer of gold, silver and copper. The company's shares reached their highest prices on September 1. At closing on November 12, the shares were trading at 1,675 rubles. Expected dividend payments for the entire 2021 could be up to 4% per annum.
(SELG) is a gold and tin producer. The company's quotes have grown by more than 100% over the year. The main growth potential was achieved not only due to the increase in the value of the main produced asset - gold, but also due to the improvement of corporate governance in the company and the start of dividend payments.
(POGR) is another significant player in the gold market, which entered the Moscow Exchange only in 2021. The company does not pay dividends and, unfortunately, is experiencing a conflict among shareholders, the resolution of which could determine the direction of the company's development.
Pros:
- ease of purchase through any broker;
- shares can grow even with a stable price for manufactured products;
- companies pay dividends.
Minuses:
- force majeure circumstances that may accompany the company’s activities from industrial accidents to tax claims;
- shares can lose value regardless of the cost of the company's products.
Gold futures contract
A futures is a financial contract under which the buyer agrees to buy a certain asset from the seller at a pre-agreed price. The deal is limited in duration.
If the price of the product in the future turns out to be higher than the contract price, then the buyer makes money, since thanks to the futures he will be able to buy the product cheaper than the market, and take the difference for himself. If the value of the asset falls below the agreed value, the futures seller will earn money.
One gold futures is a contract to buy one troy ounce of gold. To purchase a contract, you do not need to invest the entire amount, but only a certain percentage (usually no more than 8%) of the value of the asset. Futures are currently trading for December 2021 - March 2021, etc.
The main risk of such investments is the leverage effect (this is what they call the use of money borrowed from a broker to purchase assets. - Note from The Secret). In April, as a result of the fall in oil prices into the negative zone, traders suffered colossal losses. Due to the leverage effect, losses or gains are multiplied, so futures contracts are not suitable for beginners or long-term investments.
Pros:
- minimal investment can yield potentially maximum revenue.
Minuses:
- high risk;
- The contract is limited in time and is not suitable for long-term investments.
Investments in gold are considered fairly conservative. The media is full of stories about how an investor bought shares of a company and forgot about them for ten years, and when he remembered, he discovered that he had become a millionaire. But few people write about stories of people investing in stocks and finding that, ten years later, they are trading for less than the price at which they were purchased. In this series, gold and precious metals occupy a special place in terms of reliability. People who opened gold compulsory medical insurance in November 2015 earned 100% of the invested funds. Perhaps they could invest their money much better, but would these investments be as reliable?
The material does not constitute individual investment advice. The financial instruments or transactions mentioned may not be consistent with your investment profile and investment objectives/expectations. Determining whether a financial instrument/transaction/product suits your interests, goals, investment horizon and level of acceptable risk is entirely your task.
Rules for handing over gold to a pawnshop without redemption
It's no secret that pawnshops accept gold at a price lower than in jewelry stores. There is no deception here - stores and workshops include in the cost of jewelry not only materials, but also the work of the jeweler who created the product specifically for the store. It makes no sense for the pawnshop to overpay for the efforts of the master.
The pawnshop also accepts gold with stones. The weight of the gemstones and the overall condition of the jewelry are not taken into account when assessing. The presence of a sample is also not important - if necessary, a pawnshop employee will check the sample in front of you. However, keep in mind: if your item is broken or in completely unusable condition, it will only be valued as scrap.
Gold necklace with cubic zirconia (go to the SUNLIGHT catalogue)
After purchasing a piece of jewelry, the pawnshop has the right to put it up for sale at a higher price. Don't be surprised if you suddenly see your ring with a big price tag on display.
Where to buy gold for savings?
1. The simplest option is to invest money in gold at Sberbank, for example, in unallocated metal accounts, the so-called compulsory medical insurance. In your personal account, the transaction can be completed in minutes, VAT is not assessed on purchases/sales, and the risk of losing treasure is minimal. In exchange for your money, the bank provides a statement stating that you are now the owner of so many grams of precious metal. Virtual gold can be purchased in small quantities, stored for as long as desired, and sold at any time at the current rate. You can also “withdraw” your bullion from your account, but the commission will be significant: for example, at Sberbank for a 1-gram piece - 600 rubles (more than 20% of the price), for 100 grams - 2520 rubles (about 10%).
In fact, with such a price for the “materialization” of the metal and the arbitrary establishment of the purchase/sale rate, impersonal gold for banks is nothing more than a means of attracting investor funds, like a deposit, but the interest on which is not fixed and the funds are not insured.
In addition to the commission upon receipt, the large difference in purchase and sale rates, the lack of insurance, the disadvantages include the fact that interest is not accrued on funds for compulsory medical insurance, all profit or loss is determined solely by changes in the world price of gold and the exchange rate of a particular bank. So, at the time of writing, Sberbank was selling gold at a price of 2993 rubles/gram, and buying it back at 2720 rubles/gram. The spread is about 10%.
Another significant disadvantage: when selling metal, you must file an income tax return and pay income tax on profits if the unallocated metal was owned for less than 3 years (13% for residents). But you can take advantage of a property deduction of up to 250,000 rubles.
Let's consider a real example: the difference between the price of gold sales by Sberbank over the year was about 20%. But the difference between the sale price and the buyback is only 9%. Essentially, for the compulsory medical insurance account holder, this is a return on investment. Let's subtract personal income tax and get a little less than 8% (personal income tax is not taken into account when owning virtual metal for more than 3 years). The maximum interest rate on a deposit for that period in the same Sberbank was about 7%. That is, over the past year, those who invested in compulsory health insurance would have gained a little - about 1%. But a year earlier, a similar investment would have brought less than any contribution - only about 1% per year.
2. The second option seems more reliable - buy gold coins and bars in banks. But! In Russia, an individual can purchase bullion from precious metals only within the banking system. When purchasing, VAT is added to the cost of the bullion in the amount of now 20%, and when selling back to the bank, VAT is not returned to the individual. That is, in addition to the difference between the purchase and sale prices, there is a 20% tax. The government is once again discussing the abolition of VAT on investment gold; if it passes, the bullion will become a popular alternative to the dollar and euro, demand will increase, which will again increase its price. Due to commissions, real gold is more expensive than virtual gold, and here you need to have good faith in its success or consider significant time horizons.
3. The author still likes the third option - buying retail gold - jewelry (rings, earrings, chains, bracelets, etc.). Both decoration and investment. Only the price per gram in a jewelry store is much higher than the price of pure metal... Where is the benefit? Indeed, the price of the product already includes the painstaking work of the jeweler, the entire sales network, and often the weight of the stones.
The price of unredeemed collateral in a pawnshop is closest to the market price. Gold pledges, which are usually used, can be sold by a pawnshop only to two places: to ordinary citizens or to factories at the price of scrap. Therefore, the price per gram here is the most adequate, one might say, equal to the world price. So, you can find pawn shops with a price of 1,700 rubles per gram of 585 purity - that’s 2,900 per gram of the purest yellow metal. Almost the world market price. If necessary, this gold can again be handed over to a pawnshop or purchased at a lower price - the market average is 1500-1550 rubles. That is, the purchasing commission - the difference between the price of a one-time purchase and sale - will be about 8%. For comparison: in the case of currency, the difference in the rates of one-time purchase and sale is about 4%.
And finally, a chart of gold prices over the past 20 years. Let's remember it this way and follow the new history of ancient gold after Basel III comes into force.
Gold price chart for the last 20 years Source: mfd.ru
Is it possible to buy gold jewelry at a pawnshop?
Buying jewelry in pawn shops will bring pleasure to connoisseurs of rare jewelry; in addition, such shopping is always much more profitable. Pawnshops have a number of advantages over jewelry stores:
- Modern products, mass-produced by factories, are lightweight and short-lived. And in pawn shops you can buy higher quality jewelry, for example, created according to Soviet quality standards.
- Stores present two or three collections of jewelry, which change no more than once a season. In a pawn shop you can find an absolutely unique product: unusual vintage jewelry, branded accessories from limited collections, rings and earrings from private jewelers. New jewelry appears in pawn shops much more often than in stores. Of course, you need to “hunt” for unusual items, but the result will be a profitable addition to your jewelry collection.
