Loans Against Bullion and Krugerrands
What happens if the gold price changes during my loan?
The short answer
Under a typical bullion-backed loan, the amount you owe is set by the credit agreement and does not move with the gold price, but the value of the coins or bars held as security does. If the price falls, the gap between your debt and the value of the security narrows, and the agreement may set out consequences. If the price rises, the debt stays the same. Knox's pawn agreement has no margin-call clause: the amount you owe does not change with the gold price, and Knox does not ask for additional security or early repayment if the price falls.
Why the gold price matters during a loan
Gold is priced internationally in US dollars per troy ounce, so its rand value moves with both the metal price and the exchange rate. When you borrow against bullion, those movements change the value of your security from day to day, while your loan balance changes only through interest, fees and repayments.
If the gold price falls
A falling price reduces the value of the security relative to what you owe. Lenders allow for this through the advance rate, but a large or sustained fall can erode that buffer. Depending on the agreement, a credit provider may have the right to ask for additional security or a part repayment, or to take other steps the agreement sets out. If the loan is not repaid and the bullion is sold after default, a lower price means lower proceeds, and the agreement and the law determine how any shortfall is treated.
If the gold price rises
A rising price increases the value of the security, but it does not reduce the amount you owe or entitle you to more credit unless a new or amended agreement is concluded. The value of the bullion when it is returned to you may be higher or lower than when you borrowed.
What depends on Knox policy and what to do next
Whether price movements can trigger any action during a Knox loan, how you would be notified and what options you would have are set out in the credit agreement. Read those provisions carefully, together with the default steps. If a payment is missed, Knox sends a written default notice giving you time to pay. If the arrears are not paid within that period, the loan ends and Knox may sell the pledged goods without a court order. The proceeds settle what you owe: any surplus is paid back to you, and you are not liable for any shortfall. Default interest is charged at the same rate as the loan. You can settle early at any time if you decide to end your exposure under the loan. You can settle early at any time without penalty. Ask Knox for a settlement figure, which is valid for 24 hours; you can also make extra payments at any time without notice. If you may need more time, ask how the security would be valued for any extension. There is no automatic right to extend a loan. Any change to the term must be agreed and recorded in writing.
How Knox handles this
Ready for the next step?
Speak to the Knox team about your situation. They will confirm current pricing, availability and requirements before you decide.
