Muthoot Finance, Manappuram Finance, other stocks rise up to 5% as gold prices hit Rs 1.48 lakh/10 grams

Gold futures with August expiry on the Multi Commodity Exchange of India (MCX) gained around Rs 2,288 per 10 grams, or nearly 2%, hitting the day’s high at Rs 1,48,046 per 10 grams. The contracts with October expiry comfortably soared above Rs 1.5 lakh per 10 grams.

Gold hit its highest level since June 23 in the international market, with spot gold rising more than 1% on Friday morning. This came as weaker-than-expected nonfarm payrolls and private payrolls data tempered concerns around inflation and higher-for-longer interest rates.

US job growth slowed sharply in June and payroll gains for the prior two months were revised lower, data released on Thursday showed, pointing to a cooling labour market and prompting financial markets to reduce expectations for a near-term rate hike. The unemployment rate dropped to 4.2% last month from 4.3% in May as workers left the labour force, pushing the participation rate to its lowest level in more than five years.

Also read: Gold price at Rs 1.47 lakh/10g; silver gains Rs 5,000/kg as US jobs data cools inflation worries. What are experts saying?

“The figures challenged the narrative that the Fed remains on track to hike in the second half of this year,” Reuters quoted Westpac analysts as saying in a research report. The tepid jobs data doused traders’ expectations of an imminent rate hike and raised the odds that the Fed will keep rates on hold until October.Traders are now pricing in a 46.8% probability that the U.S. central bank will keep rates steady at its meeting on September 15 to 16, compared to a 35.8% chance a day earlier, according to the CME Group’s FedWatch tool.

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Notably, this boosted gold prices today as higher interest rates typically weigh on non-yielding gold, as they make interest bearing assets more attractive. Silver prices also sharply gained today, rising more than 2% to near its highest level in more than a week.
Also read: Jewellers may be louped in for idle gold mobilisation

Why are gold financier stocks rising today?

Manappuram Finance, Muthoot Finance and IIFL Finance offer loans to its customers with gold as collateral. Rising gold prices will increase the value of the pledged collateral. Since gold loans are sanctioned based on the per-gram valuation of gold, higher prices will require borrowers to pledge lesser jewellery to access the same loan amount.

What lies ahead?

According to Manoj Kumar Jain of Prithvi Finmart, gold and silver prices are expected to remain volatile in Friday’s session amid fluctuations in crude oil prices, the dollar index and U.S. bond yields.On the MCX, Jain said gold has support at Rs 1,44,400-Rs 1,43,350. The yellow metal will likely find resistance at Rs 1,47,100-Rs 1,48,800 levels, according to the analyst.

(With inputs from agencies)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)