‘I was turned away’: High gold prices cause cash crunch at Malaysia pawnshops ahead of CNY, Ramadan

KUALA LUMPUR – The gold bracelet had been in Ms Aminah Sharif’s family for decades – a gift from her grandmother and a quiet form of insurance against hard times.

Ms Aminah, a homemaker and mother of two, needed about RM2,000 (S$650) to repair the family’s only car – essential for school runs and her husband’s commute to his job with the state religious department. She also needed to buy groceries ahead of Ramadan and traditional Aidilfitri clothing for her two children.

So, on a morning in late January, she carried the bracelet from one pawnshop to another in the town of Arau, in northern Perlis state, hoping to raise cash against her bracelet – only to come up empty-handed.

“I called three other outlets and told them I had a gold bracelet and wanted to pawn it, but they too turned me away, saying they had no funds,” Ms Aminah, 41, told The Straits Times.

What happened to Ms Aminah is becoming more common across Malaysia.

Record-high gold prices

have strained the country’s gold-backed lending infrastructure – where families pawn gold jewellery for short-term cash – leaving some lenders short of funds. This has forced them to turn away walk-in customers just as families prepare for Chinese New Year and Ramadan, which are peak spending periods in South-east Asia.

For many Malaysians, pawning gold is not a speculative financial strategy but a routine way to manage cash flow for emergencies and household expenses such as car repairs, medical bills and school fees. The system has long provided a financial cushion for working-class families.

But sharp swings in gold values have disrupted that safety net, creating a liquidity crunch at pawnshops during the worst possible time.

In Selangor, school clerk Zakaria Ahmad, 39, struggled to raise funds for a medical procedure. He brought a 10g gold item to two pawn outlets, expecting a maximum loan. Instead, he was told to wait. “They said they would call me when they have enough funds,” he said.

It had been three days when ST met him, and he was still waiting.

​The liquidity trap

As gold becomes more valuable, the institutions that lend against it can run out of the cash needed to fuel those loans.

​Gold prices in Malaysia recently climbed from about RM610 a gram to a record peak near RM760, before retreating to around RM670. Globally, this surge was driven by central banks seeking safe havens and investors piling into gold exchange-traded funds amid geopolitical uncertainty.

Across the border in Singapore, the retreat in prices

prompted a rush of retail buyers

snapping up physical gold,

with queues forming

at jewellery shops and bullion counters as customers moved in to buy the dip.

​In Malaysia, industry experts have observed the volatility triggering a phenomenon known as “overlapping”.

Given the ease of obtaining loans from pawnbrokers compared with banks, when prices rise, customers take out a new loan against the same piece of gold to repay an old one and pocket the difference in cash. This surge in refinancing creates a massive cash outflow for lenders.

​The strain has been noticed at outlets such as the ones run by Pos Malaysia, the national postal service, which operates 66 gold-backed financing facilities. Similar facilities backed by local financial institutions such as Bank Rakyat and Bank Muamalat are also affected.

​“On paper, it may look like we gain from higher loan amounts when gold prices rise,” said a Pos Malaysia insider, who wished to remain anonymous since they were not authorised to speak to the media.

“But liquidity remains a problem because our profits from interest and storage fees come in slower than the cash that goes out.”

During a visit by ST to a Pos Malaysia outlet in Bangi, Selangor, a printed notice informed customers that the branch was not accepting new pawns because it had run out of funds.

Pos Malaysia charges about 1 per cent monthly interest on the total loan amount disbursed.

​The pressure has spilled into private jewellery shops as well. Mr Mohamed Fadhil F.E, a Singaporean jeweller based in the upscale Kuala Lumpur neighbourhood of Bangsar, said his store, which buys gold outright rather than lend against it, saw 130 customers in two months, compared with the usual 20.

​The jump in volume and the high stakes of the current market forced him to invest RM39,000 in a precious metal testing machine to verify the quality of items brought in.

“I need to be careful. An item may be declared as high quality but turns out to be something else,” he told ST.

​Deeper economic stress

​The fact that even gold-backed lenders are facing a liquidity strain points to deeper stress in household finances, said Dr Ahmed Razman Abdul Latiff, an economist at the Putra Business School of Universiti Putra Malaysia.

​“What we are seeing is the result of low and stagnant wages, high borrowing costs, and rising cost of living,” he told ST.

He noted that despite government assistance programmes like the Sumbangan Tunai Rahmah cash aid scheme, many urban families still lack disposable income.

​The government is currently updating PADU,

a centralised social security database

, to better identify those who need aid, Dr Razman said. However, for families like Ms Aminah’s and Mr Zakaria’s, the help may not come quickly enough.

He added that the government could consider adopting Qardhul Hasan, an alternative financing model that offers free interest loans to the needy. The model, Dr Razman said, is already in operation in Pakistan, Indonesia, Iran and Sri Lanka.

As for Ms Aminah, she eventually secured RM2,300 through short-term financing with a pawn-broking outlet in Padang Besar, some 40km away from her home.

Her bracelet will be held for 10 months, during which she must pay storage and financing fees. If she fails to keep up with payments, the heirloom will be forfeited.

“It wasn’t easy, but I didn’t have many options,” she said.