Gold loan non-banking financial company (NBFC) stocks continued their impressive rally during Thursday's trading session on January 29, defying the broader weakness in the Indian equity markets. The sustained upward momentum was primarily fueled by the spectacular surge in gold prices, which reached unprecedented levels, creating a favorable environment for companies in the gold lending business.
Stock Performance Highlights
Shares of Muthoot Finance witnessed a significant jump of 5%, climbing to an intraday high of ₹4,149.50 per share. Meanwhile, Manappuram Finance shares gained 2.5%, reaching ₹298.75 apiece. Investor sentiment toward these gold loan specialists remained overwhelmingly positive, buoyed by expectations that the continuous rise in gold prices would further stimulate demand for gold-backed loans.
Annual Performance Reflects Gold Rally
The stellar performance of these stocks in Thursday's session is part of a broader trend that mirrored the gold price rally throughout 2025. Manappuram Finance concluded the year with an impressive 64% surge, marking its best annual performance in five years. Its peer, Muthoot Finance, delivered an even more robust return of 78.4%, highlighting the strong correlation between gold prices and the fortunes of gold loan NBFCs.
Multiple Factors Driving the Rally
Beyond the gold price surge, several other factors contributed to the resilience and growth of gold loan NBFC stocks. These companies have experienced sustained demand for gold loans over recent quarters, with financial analysts anticipating this trend to strengthen further in the coming months.
The healthy financial performance of these NBFCs, coupled with target price upgrades by market analysts, has bolstered investor confidence. Additionally, the easing of lending guidelines by the Reserve Bank of India (RBI) has provided a supportive regulatory environment, enabling these stocks to withstand market volatility and deliver consistent returns throughout 2025.
Gold Prices Scale New Heights
Gold prices extended their gains for a third consecutive session, with February futures on the Multi Commodity Exchange (MCX) rising by another 9% to establish a fresh record high of ₹1,80,799 per 10 grams. This milestone marked the first time gold prices crossed the ₹1.80 lakh threshold, representing a remarkable 31% increase so far in January alone.
International Market Dynamics
In the international market, spot gold prices soared above $5,600 per troy ounce, achieving a month-to-date surge of 30%. The previous trading session saw spot prices close 4.6% higher, recording the most substantial one-day gain since the peak of the COVID-19 pandemic in March 2020.
The sustained rally in gold prices indicates that investors continue to flock to safe-haven assets amid elevated geopolitical tensions, maintaining the appeal of precious metals as a reliable store of value.
Geopolitical and Economic Drivers
Tensions in the Middle East have resurfaced following warnings from US President Donald Trump to Iran regarding nuclear deal negotiations and potential military action. Trade concerns have also kept prices elevated, with Trump threatening additional tariffs on South Korea and Canada.
Although the US Federal Reserve maintained interest rates on Wednesday, as widely anticipated, market attention has shifted toward growing expectations that President Trump will soon announce his selection for the next Fed chair. Trump has predicted that interest rates will decline once the new chair assumes office, adding another layer of uncertainty to monetary policy outlook.
Currency and Policy Influences
The gold rally has been further supported by concerns over the independence of the US Federal Reserve, reinforcing the debasement trade narrative. A weakening US dollar has also aided the precious metals rally, with the dollar index touching a four-year low earlier this week. President Trump has stated that he is not concerned about the recent decline in the world's reserve currency.
Reports suggesting that global funds are moving out of US markets amid uncertainty over Trump's economic policies have added downward pressure on the dollar, indirectly benefiting gold and other precious metals.
Disclaimer: We advise investors to consult with certified financial experts before making any investment decisions.
