Gold has always been considered a safe haven and a store of value. But few people know that it can also be used as collateral to obtain a loan. This practice, widespread in some countries, remains little known in Italy. The main reason is that traditional banks, historically, prefer to use real estate or corporate guarantees as collateral rather than precious assets such as gold.
However, as the financial sector evolves and banking services become increasingly digital, new opportunities are emerging for those who own physical gold and want to monetise it without selling it.
I am not a financial advisor:
The information provided does not constitute a solicitation for the placement of personal savings. The use of the data and information contained as support for personal investment operations is at the complete risk of the reader.
The mechanism of lending with gold as collateral is relatively simple, but little known. In practice, those who own physical gold, such as certified bars or investment coins, can deposit it with a bank or a specialized financial institution, which in exchange grants a loan based on the market value of the deposited gold. The amount granted usually varies between 60% and 80% of the total value of the gold, to ensure adequate coverage in the event of price variations.
Once the agreement is made, the gold is stored in secure vaults, where it remains until the loan is repaid. During this period, the owner of the gold cannot dispose of it freely, but has the option to redeem it at any time, repaying the amount received plus the agreed interest. If the debtor fails to repay the loan within the agreed term, the bank or financial institution can sell the gold to recover the credit granted.
An important aspect of this practice is the valuation of gold: to be accepted as collateral, it must be of a minimum purity established by financial institutions (usually 24 carats for bars and at least 22 carats for coins). In addition, some banks require that gold be certified by recognized bodies such as the London Bullion Market Association (LBMA).
This type of loan can be an interesting solution for those who need immediate liquidity without selling their gold, especially in times of economic uncertainty when gold holds its value better than many other forms of investment.
#2. Where this service is offered
Gold collateralized loans are widespread in several countries, especially in those where gold is considered an important asset for family and personal financial security. Let’s see some of the main geographical areas where this service is consolidated.
Switzerland: Considered the world capital of secure finance, Switzerland offers numerous opportunities to obtain loans backed by gold. Many private banks allow customers to deposit bars and coins in high-security vaults and obtain financing in return.
Germany: In Germany, there are also banks and financial institutions that specialize in loans with gold as collateral. However, compared to Switzerland, the market is less accessible to small investors and more oriented towards customers with large amounts of gold to deposit.
United Kingdom: In the UK, private banks and financial institutions offer this option to their clients, especially those involved in precious metals investments.
India: India has the world’s largest gold-backed lending market. Gold is often used as collateral for loans from banks and non-banks and is an important asset for many households.
Singapore : Considered a global financial hub, Singapore offers various solutions for those who want to obtain gold-backed loans, with transparent and competitive conditions.
Generally, in countries where the gold market is more developed and regulated, banks and financial institutions see the precious metal as a form of solid collateral, allowing gold holders to temporarily monetise it without selling it.
#3. Advantages and disadvantages
Like any financial instrument, gold-backed lending has a number of advantages and disadvantages that are important to consider before making a decision.
Advantages
Quick access to liquidity: Unlike other loans, the process of obtaining it is generally faster since gold has an easily determinable value.
Ownership of the gold is not lost: the owner retains the right of redemption and can get his gold back once the loan has been repaid.
Potentially lower interest rates: Compared to unsecured loans, gold reduces the risk for the bank, which can translate into better terms for the borrower.
Greater security than other collateral: Gold is a tangible asset, less subject to sudden devaluations than other forms of collateral such as stocks or bonds.
Also available for those with low credit ratings: since the loan is secured by gold, the bank takes a lesser view of the applicant’s creditworthiness.
Disadvantages
Limited Gold Value Loan Percentage: Typically, you get between 60% and 80% of the value of the gold you deposit, which may be insufficient for some financial needs.
Storage and insurance costs: Gold must be stored in secure vaults, and this can lead to additional costs that reduce the economic benefit of the loan.
Risk of gold loss: If the loan is not repaid, the financial institution can sell the gold to recover the debt.
Limited availability of the service: not all banks offer this type of loan, making it less accessible than other financial instruments.
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