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Gold Hits Record Highs, Boosting Pawn Shops
30 Jan
Summary
- Pawn shop stocks rally as gold and silver reach record prices.
- Jewelry is the most frequently sold and pawned category.
- Analysts remain bullish despite regulatory and price risks.
Pawn shop operators EZCorp and FirstCash have experienced significant stock rallies, with EZCorp up nearly 60% and FirstCash up around 35% over the past six months. These gains coincide with gold surpassing $5,500 per ounce and silver reaching an all-time high of $121.79.
Historically, precious metals have been sought during economic uncertainty, making them a safe haven for investors. This dynamic now benefits pawn shops, as higher precious metal prices incentivize customers to pawn their gold jewelry, which remains the most frequently pawned category.
Analysts like Brian McNamara have reiterated buy ratings, citing that increased gold prices directly benefit companies like EZCorp, as gold constitutes most of their collateral. He noted that customers are bringing in less gold for the same loan amount, suggesting they have more collateral at home.
FirstCash is also well-positioned due to its quarterly inventory turnover and minimal scrap inventory. Despite inherent risks such as unfavorable regulations and potential sharp declines in metal prices, analysts remain optimistic about the steady business and demand from both core customers and higher-income individuals seeking value.
