High price of gold poses systemic risk for jewellers who avail loan

Soaring gold prices may have raised value of the existing inventory of the bullion jewellery, but pose a systemic risk for medium- and large-sized jewellers, who avail gold loan from lenders and will be now required to pay the mark-to-market margin. Since the fresh sale of jewellery is quite low, they are forced to use the money collected through investors’ monthly deposit scheme for paying margin.
 
Jewellers practising ethical business are needed to buy gold as underlying on the day they receive a monthly share of jewellery deposit. These deposits are usually for 11 months and on maturity, depositors get gold jewellery worth deposit amount