Kuala Lumpur, 7 February 2026 – Malaysia’s gold-backed lending system is under strain as record-high gold prices trigger a liquidity crunch at pawnshops nationwide, forcing some outlets to turn away customers seeking urgent cash ahead of major festive periods such as Chinese New Year and Ramadan.
For many Malaysian households, pawning gold jewellery is a traditional and essential financial safety net used to cover emergencies, medical expenses and festive spending. However, recent gold price volatility has disrupted this system, leaving lenders short of funds at a time when demand for short-term loans is surging.
Record Gold Prices Strain Lending Capacity
Gold prices in Malaysia recently climbed sharply from about RM610 per gram to a record high near RM760, before easing slightly to around RM670. This surge has significantly increased loan values, putting pressure on pawnshops’ available liquidity.
As gold prices rise, borrowers can secure larger loans against the same gold items. This has led to a surge in refinancing activity, where customers take out new loans using previously pawned gold to extract additional cash — a phenomenon known as “overlapping.” This refinancing cycle creates significant cash outflows for lenders faster than they can recover funds through repayments, creating liquidity shortages.
Pawnshop operators, including facilities run by Pos Malaysia and financial institutions such as Bank Rakyat and Bank Muamalat, have reported cash shortages. Some outlets have even posted notices informing customers that new pawn transactions cannot be accepted due to lack of funds.
Households Struggle to Access Emergency Cash
The liquidity crunch is affecting ordinary Malaysians who rely on gold-backed loans for urgent financial needs. In some cases, customers have been turned away or asked to wait until pawnshops replenish their cash reserves.
Economists warn that the situation reflects deeper structural financial pressures facing Malaysian households, including stagnant wages, rising living costs and higher borrowing expenses. Even with government cash aid programmes, many families still face limited disposable income and rely on pawnshops as an accessible financing option.
Festive Season Amplifies Demand for Short-Term Financing
The timing of the cash crunch is particularly challenging, as Chinese New Year and Ramadan typically drive increased household spending on essentials, travel, medical expenses and festive preparations.
The gold-backed lending system has long served as an informal financial buffer, especially for working-class families without easy access to traditional bank credit. However, the current liquidity pressures highlight the vulnerability of this safety net amid global gold market volatility.
Broader Implications for Malaysia’s Economy
The pawnshop liquidity crunch reflects broader economic dynamics, including rising demand for safe-haven assets like gold amid global uncertainty. While higher gold prices increase asset values, they can simultaneously create short-term liquidity constraints for lenders.
For policymakers and financial institutions, the situation underscores the need to strengthen financial resilience among lower-income households and ensure access to emergency financing during periods of economic stress.
