Gold surges to two-month high, lifting Muthoot Finance, Manappuram and IIFL stocks

Shares of gold-financing companies Manappuram Finance and Muthoot Finance gained on August 20 as gold prices surged to their highest level in more than two months. The rise in bullion prices was supported by softer US Treasury yields and a weaker dollar.Manappuram Finance shares gained around 2%, while Muthoot Finance rose 4%. IIFL Finance also traded higher during the session.Gold Rally Supports Gold-Loan CompaniesThe increase in gold prices is positive for lenders that provide loans against the precious metal. Higher bullion prices raise the value of gold pledged as collateral, potentially allowing lenders to disburse larger loans while providing an additional cushion against credit losses.Lalithaa Jewellery IPO Gets 69% Subscription on First Day Spot gold climbed above $4,525 per ounce, its highest level since June 2, following a gain of more than 4% in the previous session.Market analysts, however, cautioned that gold’s sharp rally could be followed by some consolidation. They noted that prices had broken through the $4,400-$4,500 range and that maintaining levels above this zone could support further gains.US Yields, Inflation Concerns Keep Gold in FocusUS bond-market developments have remained an important driver of gold prices. The US Treasury announced plans to double the size of liquidity-support buyback operations involving longer-dated Treasury notes and bonds. The announcement followed a significant bond selloff, with investors demanding higher yields amid increased inflation concerns. The outlook for US interest rates is also influencing bullion markets. Minutes from the Federal Reserve’s latest meeting indicated that several policymakers were concerned about inflation and open to higher interest rates.Markets currently see a greater probability of the Fed holding rates in September, although a rate hike remains possible.Gold generally benefits from lower interest rates and declining bond yields because the metal does not generate interest income. Conversely, higher rates can reduce its attractiveness relative to yield-bearing assets.Analysts also pointed to concerns surrounding government debt, fiscal pressures and financial stability as factors that could continue supporting demand for gold as a safe-haven asset.

Shares of gold loan companies, including Muthoot Finance, Manappuram Finance and IIFL Finance, jumped up to 4% on Thursday as the yellow metal’s prices surged, following a surprise liquidity support announcement by the US Treasury.Muthoot Finance shares jumped more than 4% to trade at Rs 2,985 apiece, while those of Manappuram Finance and IIFL Finance gained more than 3% each. This comes as gold futures for October delivery on the MCX rose Rs 447 per 10 grams to Rs 1,58,443 per 10 grams on Thursday morning. December contracts jumped above Rs 1.6 lakh per 10 grams, while February contracts traded above Rs 1.62 lakh per 10 grams.In the international market, gold prices hovered near their highest level in more than two months on Thursday after a surprise liquidity support announcement by the US Treasury pushed yields and the dollar lower. Spot gold jumped to $4,526 per ounce, the highest level since June 2.This came as US Treasury yields fell, with the increased demand following an announcement that the Treasury Department would double the size of liquidity support buyback operations for longer-dated notes and bonds. The US dollar meanwhile remained muted, making the American greenback-priced metals cheaper for buyers ⁠holding other ‌currencies.Also read | Gold rebounds above Rs 1.58 lakh/10 grams as US bond yields decline. What lies ahead?Why are gold financier stocks rising today?Manappuram Finance, Muthoot Finance and IIFL Finance provide loans with gold as collateral. Rising gold prices will increase the value of the pledged collateral. Since gold loans are sanctioned based on the per-gram valuation of gold, higher prices will require borrowers to pledge less jewellery to access the same loan amount, which in turn can make such loans more attractive.Muthoot Finance shares have gained over 3% in a week but declined more than 22% in 2026 so far amid a sharp correction in gold prices. In the longer term, the shares of the company have delivered over 10% returns in one year, 139% in three years and 103% in five years.Manappuram Finance shares are meanwhile up 11% in 2026 so far, delivering 136% returns over three years. IIFL Finance shares gained 15% in three years.What lies ahead?Higher crude prices and continued uncertainty after the US-Iran MOU ended without fresh talks kept sentiment cautious for gold in the previous session, said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities. He noted that the Strait of Hormuz remains a key geopolitical trigger, while markets will also track the FOMC meeting minutes, US jobs data and crude movements for further direction. “Gold is likely to remain volatile as geopolitical developments continue to drive safe-haven demand,” according to the analyst.The recent pullback in gold prices may have created an opportunity for investors to gradually accumulate the yellow metal, according to Jefferies’ Global Head of Equity Strategy Christopher Wood and billionaire hedge fund manager John Paulson. Both believe the precious metal could be at the beginning of a long-term bull run.Also read | Why is market rising today? Sensex rallies 500 points, Nifty tops 24,200. 5 key factors behind market rebound(With inputs from agencies)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)