Gold, silver tumble 3% as Hindustan Zinc drops 5%, Muthoot Finance falls

According to CNBC TV18 and Bloomberg reports, spot gold dropped as much as 1.2% to below $4,140 an ounce, reversing modest gains recorded in the previous session. Silver fell 2.8% to $63.25 an ounce, while platinum and palladium also traded lower. On the MCX, silver July futures were trading lower by ₹6,176, or 2.64%, at ₹2.28 lakh per kg, while gold August futures slipped ₹1,269, or nearly 1%, to around ₹1.46 lakh per 10 grams. The Bloomberg Dollar Spot Index edged higher, adding further pressure on precious metals as they are priced in the greenback. According to CNBC TV18, COMEX silver declined 2.4% or $1,573 to $64.010 per ounce, with the white metal having touched a high of $65.315 and a low of $63.910 during the session. Spot silver prices slumped 5% to $61.90 per ounce, hitting their lowest level since June 11, with domestic silver futures plunging by ₹2.25 lakh per kilogram. Latest data shows gold futures on the MCX for August 2026 delivery have fallen by over ₹7,000 per 10 grams over the past two sessions to ₹1,41,205, while in the international market, gold prices slipped below $4,000 an ounce for the first time since November 2025. Gold prices tumble over ₹5,000 per 10 grams on MCX, with the near-month gold futures contract falling ₹5,529 per 10 grams in Wednesday's trade to ₹1,40,928, marking its lowest level since March.

Hindustan Zinc shares fell 5% in Tuesday's trade, reaching an intraday low of ₹544 as a sharp decline in global silver prices weighed on investor sentiment. As reported by CNBC TV18, Hindustan Zinc is the only pure listed silver play in India, making it highly sensitive to silver price movements. Silver accounts for around 50% to 45% of the firm's EBIT, making the stock particularly vulnerable to fluctuations in the white metal. From their peak, Spot Silver prices have corrected nearly 50%, with the metal having fallen by nearly ₹2.30 lakh, or about 50%, from its record high of ₹4,57,328 per kg. The decline reflects broader market concerns over precious metals amid mounting inflation pressures and expectations of tighter monetary policy in the US. Silver's month-to-date losses widened to 15%, erasing all the gains recorded in May, as precious metals have witnessed heightened volatility since the outbreak of the conflict in the Middle East.

As reported by CNBC TV18 and Bloomberg, inflation concerns have outweighed the initial optimism surrounding negotiations aimed at resolving the Iran conflict. The dollar index, which tracks the US currency against a basket of six major peers, climbed to a more than one-year high on Wednesday and traded around 101.5 on Thursday, reflecting growing expectations of a hawkish US Federal Reserve. According to The Economic Times, the US Federal Reserve kept interest rates unchanged at its latest policy meeting, but a larger number of policymakers signalled the possibility of higher borrowing costs later in the year amid concerns over inflation remaining above the central bank's 2% target. According to the CME FedWatch Tool, traders are now expecting three rate hikes this year and see roughly a 67% probability of a hike in September. New Federal Reserve Chair Kevin Warsh surprised markets with a hawkish tone at his first rate-setting meeting last week, putting further downward pressure on bullion. While gold is traditionally seen as an inflation hedge, it loses its appeal as a non-yielding asset in a high-interest-rate environment, with expectations of further US Federal Reserve rate hikes pressuring bullion and raising concerns over collateral values and loan demand for gold-backed lenders.

According to CNBC TV18, gold financiers are under significant pressure despite strong collateral buffers, with their managements repeatedly stating that moderate gold price corrections do not materially impact asset quality. The key concern is growth, not credit risk, as their recent over 50% gold loan growth was aided by rising gold prices and higher borrowing eligibility. The sharp correction in bullion prices has raised investor concerns that a sustained decline could lead to higher non-performing assets (NPAs) for gold loan financiers and weigh on their lending prospects. A steep fall in gold prices could force lenders to offer lower loan amounts against the same quantity of pledged gold, potentially slowing loan disbursements. Another key concern is that if gold prices continue to decline, borrowers may be required to provide additional collateral or repay a portion of their loans, which could result in higher NPAs. While lenders can auction pledged gold if borrowers fail to meet margin requirements, such measures could increase operating costs and put pressure on profitability. Falling gold prices also tend to reduce the attractiveness of gold loans, potentially dampening fresh demand. Muthoot Finance, a pure-play gold loan lender, is down 9% in the last one month with gold loans constituting almost the entire loan book, while Muthoot Finance shares are down 27% from their peak of ₹4,149 and Manappuram Finance shares are trading 8% below their recent high of ₹334. CSB Bank, one of the most gold-focused banks, is down 5.2% on Thursday, extending year-to-date losses to 33% as gold loans contribute around 42%-45% of total advances.