Shares of gold financing companies witnessed selling pressure after price of the precious metal tumbled in the commodities market.
Shares of two gold financing companies, Muthoot Finance (down 2.29%) and Manappuram Finance (down 1.87%) declined.Higher gold prices provides an additional margin of safety for gold financing companies. The safety margin is the difference between the market value of gold in the ornaments and the loan amount disbursed to the customers against these ornaments.
Gold prices fell nearly 4% to trade briefly below the Rs 50,000 mark on Wednesday. MCX Gold futures for 5 August 2020 settlement were trading 2.77% lower at Rs 50,491.
In the international commodities market, gold future prices declined to as low as $1,879.50 per ounce so far during the day. The sharp drop in gold prices has been triggered by outflows from gold ETFs.
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