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Takeaway: Q3 will be tricky for payday lenders but if gold can maintain its current levels, they can look forward to a positive fourth quarter.

Gold prices materially affect earnings at payday lenders like EZ Corp (EZPW) and First Cash Financial Services (FCFS). Q3 earnings for these types of companies will be challenging with tough comps and gold volume headwinds but things are likely to improve heading into Q4. 

In the third quarter gold averaged $1656/oz, which is 3% lower than the comparable period last year. That’s tough for Q3, but if gold continues to hold at $1777/oz,  that would mean a year-over-year increase of 5% in 4Q12 and a positive 4% year-over-year change in 1Q13. The higher gold goes, the better things are for payday lenders, particularly those who are exposed to gold the most. 

GOLD: The New Pawn Star  - Gold