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Economic Rebound Creates Crisis For Big Pawnbrokers

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http://www.independent.co.uk/news/business/news/economic-rebound-creates-crisis-for-big-pawnbrokers-8849849.html

Shares in Albemarle & Bond hit a ten-year low yesterday as the pawnbroker was forced to make an emergency £35m rights issue.

A collapse in gold prices and possible signs of an economic recovery have hammered profits, sending shares down 50.5p, or 40 per cent, to 74.5p. Pawnbrokers were the big winners at the height of the recession, with cash-for-gold advertising hitting consumers around the clock.

However, the price of gold – seen as a safe haven during a downturn – has dropped by about a third in the past two years, slashing the value of Albemarle’s stock. The company has 230 stores but will close 33 unprofitable pop-up gold-buying shops.

More ramping over the recovery? Or is the price of gold more the problem?

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Perhaps people are running out of things to sell.

I would imagine that most of the populations gold jewellery has been cashed in already.

I know that at my local auction house they are saying that antique jewellery is becoming harder to come by.

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Thanks for the hat tip independent, I will keep watch of these shares. When the faux recovery is exposed for what it is I could easily make 100% gain on these.

Of course gold is worthless, there is no demand for it and fiat is everything /scarc

People may be keeping hold of their gold as it is not worth selling at these prices?

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I think it is also related to the fact that too many pawn shops were opened too quickly. There are several times more pawn shops than 5 years ago all chasing the same business, so was inevitable that they would crash eventually.

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Their historical share chart

http://

uk.finance.yahoo.com/echarts?s=ABM.L#symbol=abm.l;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The shares peaked in July 1011 (about 375p and now about 70p) and have fallen at a fast rate since then. Almost vertical on the chart since then.

It could be to do with increasing competition and the price of gold say if they hold a large stock of gold? but it doesn't seem to have much to do with a claimed "recovery" that's supposed to have started in the last couple of months.

Edited by billybong

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Falling price of gold if you lent too much against it

but also

People not reclaiming and not enough people coming in to buy.

I wouldn't say it reflects an economic rebound.

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From what I've observed, at some distance - there's still demand for physical gold, but not quite enough stock to meet it.

The "gold fix" has been manipulated through paper trades, and so whatever LBMA come up with as "the gold fix" seemed to, at one point, diverge from the value of the physical if proper price discovery took place.

The question to me is: has everyone in the country already traded in all their gold? Or more accurately the volumes of people trading in have fallen because there is now a shortage of supply?

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Perhaps people are running out of things to sell.

Could well be. I'm a regular at a major auction house's quarterly Free Valuation day. For the first time this morning the thirty chairs available for the normal queue of hopefuls clutching 'heirlooms' of every kind were empty, except for one guy with a worthless painting. Never seen this absence of potless punters before.

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interesting piece .... I would suggest the truth of the matter (leaving aside gold price ) is they expanded to quickly with poorly trained staff unable to value correctly , paid far to much for the " Herbert brown " chain and failed to realise that people selling gold whilst making them short term profits was actually bad for the business in the medium to long term ... afterall once the person has sold the gold they have nothing to pawn !

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interesting piece .... I would suggest the truth of the matter (leaving aside gold price ) is they expanded to quickly with poorly trained staff unable to value correctly , paid far to much for the " Herbert brown " chain and failed to realise that people selling gold whilst making them short term profits was actually bad for the business in the medium to long term ... afterall once the person has sold the gold they have nothing to pawn !

...interesting, landmark post ...you joined in July 2007 ...and this was your first post today....?.... :blink:

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