← Critical Product/Equipment/Process: Consumer, Media & Financial Services (all topics)
Gold metal loans & inventory
What it is
Jewellers borrow physical gold from banks rather than buying it outright, repaying in gold or cash when the piece sells. This hedges the price exposure on inventory that would otherwise sit unhedged for months
A jewellery store carries substantial working capital in displayed stock
Impact on industries
- Converts an unhedged commodity position into a matched one, so the jeweller earns a making charge rather than speculating on gold
- Reduces the cash required per store, which is what makes rapid store expansion financeable
- Working capital per store remains high regardless, since display inventory must be broad enough to convert footfall
- Rising gold prices inflate the value of the same physical inventory, raising funding requirements without improving volumes
- Studded jewellery carries far better making charges than plain gold, so mix shift raises margin on the same metal turnover