Gold Has Brightened This Year: Should You Invest In Gold Financiers?

Gold on resurgence in coronavirus cases globally due to the new mutuant strain and fresh lockdown imposed to combat it, there has been a sudden spike in gold rates, which has risen to 8 month high. Also the increased liquidity due to the recent dole out of the US stimulus, has imparted weakness to the greenback to the two and a half year low.

Now, on the MCX in Tuesday's trade gold has been trading flat today and is above Rs. 51000 per 10 gm, after scaling to its fresh life time high of Rs. 56200 in August this year on the bourse. And internationally gold has moved past levels of $2000 per ounce

So, amid all the buzz around will betting on gold loan financiers be rewarding, here is discussed the same below:

Now, gold financiers stand to gain as the prices of gold zoom and there is traction for gold loan in the market and also as such loans are backed by collateral in the form of gold loan kept with these institutions they do not confront asset quality issues as with other loans.

Also, another thing that needs to be brought to the potential investors in these gold financiers is that with rise in gold prices, safety margin of gold loan companies on gold loan increases. Safety margin is the difference between the market value of gold in ornaments and the loan amount given to customers against these loans. So, indeed rise in gold price augurs well for these gold financiers.

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