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Gold loan NBFC stocks came under severe selling pressure during a special trading session on February 1, with Muthoot Finance and Manappuram Finance falling 7.6% and 6%, respectively.

Both stocks have remained under pressure in recent sessions. Muthoot Finance has corrected 10.5% over the last three trading sessions, while Manappuram Finance has declined by a similar margin of about 9%.

These stocks, which had ridden a strong wave in recent months amid a sharp rally in the yellow metal, have now caught the bears’ attention as gold prices have seen a sharp reversal, erasing much of their early-2026 gains.

This has raised investor concerns that a sustained fall in bullion prices could lead to higher non-performing assets (NPAs) for gold loan financiers and weigh on their lending prospects.

A sharp decline in gold prices could force lenders to extend lower loan amounts against the same quantity of gold, potentially slowing loan disbursements. Another concern is that if gold prices continue to fall, borrowers may be required to add collateral or repay part of their loans, which could result in higher NPAs.

While lenders can auction the pledged gold if borrowers fail to meet margin requirements, this could increase operating costs and pressure profitability. Falling gold prices also tend to reduce the appeal of gold loans, potentially dampening fresh demand.

After falling nearly ₹20,000 per 10 grams on MCX in Friday’s session, the sell-off in gold prices extended during the special trading session today, with February delivery contracts dropping another ₹13,468, or 9.2%, to a low of ₹1,36,185 per 10 grams.

The latest crash brings the gold rate down by ₹44,594 per 10 grams, or 25%, from the recent peak of ₹1,80,779. A combination of factors has dampened investors’ sentiment towards the safe-haven metal, which had maintained strong confidence for 14 straight months, during which prices surged 96%.

Warsh Nomination: The primary trigger was the nomination of Kevin Warsh as the next US Federal Reserve Chair, fueling speculation of a more hawkish monetary policy and higher interest rates.

Market moves suggested that traders are dialing back expectations for policy easing under Warsh, who served as a policymaker from 2006 to 2011 and often emphasized inflation risks, even as others focused on supporting growth and jobs during the financial crisis.

The announcement ended months of speculation over who would lead the Fed, after Trump repeatedly criticized Chair Jerome Powell for not cutting interest rates.

Firm US Dollar: This, in turn, boosted demand for the US dollar, which strengthened 0.73% in Friday’s session to 96.99, making dollar-priced precious metals more expensive for other currency holders.

Margin Hike: Amid a sharp volatility in both gold and silver prices, CME Group is increasing margins on COMEX gold and silver futures. Gold margins will rise to 8% of the contract value from 6% for non-heightened risk profiles, Bloomberg reported, citing the exchange statement.

Silver margins will climb to 15% from 11% for non-heightened risk profiles, while heightened risk profile margins will increase to 16.5% from 12.1%, the report said, quoting the same statement.

Disclaimer: We advise investors to check with certified experts before making any investment decisions.

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