The conclusion of India’s festival season means that seasonal physical demand would likely slow down, making prices susceptible.
As the yellow metal’s prices continued to decline from all-time highs due to profit booking in the bullion market, gold lending businesses faced selling pressure on Thursday.
On the NSE, Muthoot Finance’s shares fell 4.29 percent to Rs 3,134.20 each. Over the course of three consecutive sessions, the stock has lost about 6% of its value. At Rs 277.90 a share, Manappuram Finance likewise saw a 2.8 percent decline.
Following a recent gain, investors booked profits, causing gold prices to drop for the third day in a row. Around the world, the metal dipped slightly approaching the $4,000-an-ounce threshold as investors worried that its recent surge in value had reached its limit.
The value of collateral decreases when gold prices are weak, which affects lending margins for gold finance businesses.
The price of spot gold has dropped by 0.5 percent. “After hitting historically overbought levels, gold saw a steep drop of 385 points (8 percent) from its most recent top, suggesting a possible trend reversal. Tejas Shigrekar, Chief Technical Research Analyst-Commodities and Currencies at Angel One Ltd., said that Monday’s finish was the highest monthly Relative Strength Index (RSI) ever seen, signaling the end of bullish momentum and paving the way for a corrective phase.
The conclusion of India’s festival season means that seasonal physical demand would likely slow down, making prices susceptible.
“We expect further declines in November and December. In anticipation of more declines in the next months, traders are increasing their exposure to put options since investor mood has changed, according to Shigrekar.
Gold is still up over 55% this year despite the latest downturn, partly due to forecasts that the US Federal Reserve would decrease interest rates by at least one quarter point by the end of 2025.