This is absolutely true and is one of the key reasons the gold loan companies are able to make money. Gold is rarely as volatile as equities. As stated earlier, the gold loan only finances you to the extent of 60%-70% of the value of your gold. If you look at the last 5 years, it has been a bad period for gold with flat to negative returns. That means you are still profitable on your hypothecated asset. Effectively, it means that the gold loan company charges you a hefty interest on a loan that is fully secured and the risk of asset price default is very negligible. Like in case of the MFIs, the gold loan business is not full regulated and that gives them enough leeway. For the financer and the refinancer, the risk in the business is very low since it is largely backed by a solid real asset like gold and that too with gold value being much more than the loan value.