EXCLUSIVE: Short-term lending against gold doubles

Robyn Hall

August 25, 2011

After hitting a high of US$1,911.46 a troy ounce set in late trading on Monday, gold fell back US$160 to US$1,751.46 between Tuesday and Wednesday this week and was this morning trading at US$1,709.45.

But over the medium term the asset has more than doubled in value – a trend borro says has prompted more people to borrow short-term against it.

Paul Aitken, chief executive of borro, said: “The value we place on loans against gold has increased sevenfold in the past 12 months.

“This reflects a global trend, in which concern about financial markets has pushed the price of more traditional indicators of wealth – such as gold – higher.

“With people’s confidence in banks at a low, we’re seeing a real change in people’s attitudes towards alternative ways of borrowing. When money is tied up in assets like gold we can offer a short-term solution.”

Aitken said that in the past six months borro had seen more people borrow against gold bars and Krugerrands – South African gold coins – as opposed to jewellery.

And he added: “Some of the people we lend to are using gold as collateral as they believe its value will rise faster than our interest rates.

“Throughout history gold has continued to grow over time. It has tended to hold its value and it has always been seen as a steady investment for the short term.”

Economic fears across Europe and the US have wiped billions off international equity markets sending the price of gold to record highs as it is traditionally viewed as a safe haven for investors.

Borro values gold by monitoring the UK Assay Office and referring to bullion dealers such as Pressmans, NTL and Gerrards for daily gold prices to ensure accurate valuations are given.

The UK used to have the fourth largest reserves of gold in the world until Gordon Brown sold 400 tons for £2bn in 1999 – more than £13bn at today’s prices.

The then Chancellor sold the precious metal for between $256 and $296 an ounce, raising less than a fifth of what would have been paid today.

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