Tag Archives: Finance

Falling Gold Price May Affect The Banks Adversely

 The falling price of the precious yellow metal is likely to cause a mixed impression upon the masses. The survey, made immediately after the gold price hit its lowest recently, reveals mixed opinions from the renowned jewelers from across the country. As per the well-known gold jewelers, the lowest price of gold may encourage the smaller of mediocre jewelers to deposit more gold with them that they can use further when the prices would go up once again.


The situation is favorable for the people as well who are largely interested in making money through investment in gold. However, the jewelers are supposed to be the most benefited people in this situation where gold is losing its price in the International market.

As a matter of fact the cost of the rented gold is open-ended where the cost is fixed while the jewelers sell them to their customers either in the form of jewelries or in the form of gold bar. This reduces the inventory risk for the jewelers as well. This lowered risk also works as a cushion against any situation caused by the reduction of the price. As the demand of gold jewelry is likely to raise in the time to come, so the interest of the banks is likely to go down further as well.

In such a situation, the banks would have to take the policy of ‘wait and watch’. The banks that are nominated by the Reserve bank of India (RBI) would be in a situation to take the commodity risk to face the loss. At the present moment, when the price of gold is going down, the market would not be in favor of the banks. However, the situation would certainly improve and then the banks would play a vital role again.