This post was contributed by a community member. The views expressed here are the author's own.

Business & Tech

Gold Fever Spikes

Record gold prices keep local pawn shops busy.

News reports and advertisements of cash for gold make it sound like a modern-day gold rush. But the action is not in panning for gold nuggets in streams and rivers—it is in playing commodities markets and hocking jewelry in local pawn shops.

Gold prices reached an all-time high Tuesday, peaking at more than $1,500 per ounce before ending the day just under that mark. The price increase is not surprising. Gold’s value rose more than 31 percent in the last 12 months, according to CNNMoney.com.

While macroeconomic concerns can lead investors to buy gold, it is people's personal economic situations that keep pawn shops busy buying gold rings, necklaces and bracelets. And that is the case no matter where gold’s value stands, according to Hector Espinoza. Epsinoza says the store’s gold business is mostly independent of gold’s value dramatically increasing or decreasing—whatever the price change, gold always has value.

Interested in local real estate?Subscribe to Patch's new newsletter to be the first to know about open houses, new listings and more.

“The gold (price) goes up and down, of course,” said Espinoza. “We’ve not had a slowdown or an increase; it’s just been pretty steady the whole way.”

At Santa Cruz Pawn—where “We Buy Gold” is while the same words in neon red and gold hang inside the right one—that has not been the case. Steven Bumb, part-owner, said he believes gold price increases and the publicity that goes along with that brings his store more gold traffic.

Interested in local real estate?Subscribe to Patch's new newsletter to be the first to know about open houses, new listings and more.

“With all the advertisements on TV showing the gold value, everybody’s talking about it,” said Bumb. “It’s hard to say percentage-wise, but it has drawn a lot of people to realize their gold is worth a lot more than they thought it was.”

In Bumb’s experience—as in Watsonville—it is never just one thing that drives his store’s gold action. The price matters, but so does someone’s current financial situation. If people need money, they sell what they need to try to get by.

“They’re in a bind, and a lot of people don’t want to sell their jewelry, but they have to. It’s their monthly mortgage payment or whatever the case is," Bumb said. "We hear a lot of sad stories. So it’s half and half; people are doing it to get by—selling stuff they normally wouldn’t sell—other people are selling basically because of the gold’s value.”

The unemployment rate in Watsonville has been north of 20 percent for months and many locals are short on cash.

Wednesday, a father and his young daughter were in the Main Street shop to pawn a gold ring and electronics so they'd have cash for a family trip to Mexico to celebrate Semana Santa.

Heraldo Velasquez, a Watsonville Pawn employee, said most people come in with the intention of selling their gold jewelry but many simply pawn the items—essentially getting a high-interest, short-term loan—after learning what gold is worth these days. A $100 pawn can be repaid with $117.50 within 90 days and the person can get the valuable back. Rates increase beyond three months.

Few gold speculators have come by the store to invest in the precious metal, Velasquez added.

Also, gold’s increased value doesn't seem to have an affect on local crime rates so far, according to Watsonville police Sgt. Saul Gonzalez.

"Aside from the regular burglaries where jewelry is taken, there’s not a rise in people going after gold,” said Gonzalez.

Whatever sends customers to local pawn shops to sell their gold, the going rates mean they get more money for their gold now than before.

“They’re pretty blown out of the water; they didn’t know it (their gold) was worth that much,” said Bumb. "The end result is they’re really happy. They usually go home and dig through their things looking for whatever else they can find.”

We’ve removed the ability to reply as we work to make improvements. Learn more here

The views expressed in this post are the author's own. Want to post on Patch?