Pawnbroking chain H&T today said demand among recession-hit consumers to swap their unwanted gold for cash had more than tripled scrap profits for 2009.
The group - the UK's largest pawnbroker - now expects full-year profits at the top end of forecasts as it reaps the rewards of rocketing gold prices and a burgeoning market to trade in the precious metal.
Its update comes a day after the consumer watchdog launched an investigation of five companies offering cash for gold by post.
The Office of Fair Trading (OFT) yesterday said it was demanding information from the firms to ensure they are not breaking consumer protection laws.
However, H&T said it was not one of the five firms being investigated.
It offers a postal service, but largely trades its cash for gold across its stores, having recently launched a chain of 56 shopping centre-based 'Gold Bars' outlets.
The cash for gold market has boomed over the past year, with a number of new entrants launching in the UK and advertisements promoting their services becoming a regular feature on daytime television.
But the OFT is now casting its eye over some of those in the market following complaints from consumers and as Which? Money warned that the gold buying companies offered "shockingly bad value" and urged people not to use them.
Research carried out by Which? Money found that the gold companies that advertise on television offered people an average of just 6 per cent of the retail price of their gold.
The group sent three pieces of brand new gold jewellery to four groups that promise to buy consumers' old gold for cash, as well as to three pawnbrokers and three independent jewellers.
The group said the TV gold buyers consistently offered the lowest prices, with one quoting only £9.64 for a 9ct gold bangle that had been bought for £215 and for which an independent jeweller offered £54.
The OFT has now demanded information from the five postal companies - whose names it did not disclose - asking them to explain claims made in their advertising and on websites and give details of their business practices.
H&T said today it offers on average £4.50 to £5 a gram for gold, against a scrap value of £8.
But the group said it quotes the weight and price to a customer before making the trade, even when gold is sent in by post.
John Nichols, chief executive of H&T, said: "The principal should be that the consumer knows how much it weighs and the carat so they can make a good judgment and compare with other providers on the market."
Gold prices have raced higher in recent years, spiking to all-time highs amid the financial crisis as investors have looked for a safe haven for their cash.
Industry figures reveal that gold has offered a return of 308% over the past 10 years.
H&T has significantly expanded its operations to take advantage of the gold market, but said today it was braced for a potential fall in demand and scrap margins as it faces increased competition.
The group added that despite the gold boost, like-for-like sales are expected to have fallen "slightly" in 2009 and it added caution over the year ahead.
Shares plunged 9 per cent on H&T's guarded outlook for 2010.Reuse content