
The Valuation School
January 29, 2025 at 04:15 PM
*Trump Tariffs might hurt Indian Jewellery player?*
*By The Valuation School*
If Trump puts Tariffs Gold Imports, Indian Banks May Double Interest Rates on Gold Metal Loans putting jewellry Firms Face Profit Squeeze.
*What is Gold Metal Leasing?*
Gold Metal Loans (GMLs) allow jewellers to lease gold from banks instead of buying it, helping them avoid price risks.
Banks import gold from global suppliers like JP Morgan and HSBC and lease it to jewellers for 180-270 days. Jewellers repay the loan after selling the gold, making it a key tool for managing cash flow and inventory risks.
*Why Are Rates Increasing?*
The US may impose higher tariffs on gold imports, causing global suppliers to move gold reserves to the US. This has tightened supply and raised costs, leading Indian banks to increase GML rates from 1.5-2% to 3-6% after February 20, 2025.
*Impact on Jewellers*
Higher GML rates will increase costs for jewellers, but they can’t pass this to customers. This affects cash flow and profit margins, making business more challenging.
Until US tariffs are confirmed, jewellers face financial uncertainty and a potential hit to their bottom line.
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