Gold Pledging
You mean, you want to pledge gold and not sell, right?
Advantage of pledging gold now, has one advantage. You can get more loan because the rate of the gold has gone up.
You get the gold loan for around 12% interest rate, that is quite good compared to personal loan. But the main question we have to answer to ourselves is, what are we going to do with this loan?
If it is for meeting necessary personal expenditure, makes sense. But I would also like to provide below options for replacing personal loan. For example, loan on our LIC policy (Endowment) is 9.5% and loan on PPF is around 8.5%. Have you compared such options? These are better choices. But if we don’t have these options, and our credit rating is bad, then gold loan in better choice. (Remember, banks are offering personal loans for 12-14% for decent credit rating). Also I would like to suggest taking top up loan on your existing homeloan. Check with your bank. The rate could be around 8-8.5%.
If you want to invest this money from pledged gold loan, then suggest you to put additional care before going for gold loan. Where you want to invest this money that fetches you more than 12% with less risk? If you have such option (like investing in your business to grow), makes sense. If you are thinking of investing this money in FD or debt funds, it doesn’t make any sense.
Also is it good to buy more Gold at this price? I don’t think so. Since the capital market and currency markets are very volatile people flock to gold. Because it is considered as hedging against market. Meaning capital market (share market) and gold are generally move opposite direction, therefore gold price is increasing. But capital market is coming back again (even though lot of volatility), I don’t think gold will have fantastic run in near future.
If your investment in gold means, buying jewellery, we need to understand we are paying 15-20% additional money to the weight of gold. If this additional amount compensates for the emotional value of gold, I understand. But if Idea is purely investment then buying govt gold bonds are definitely better choice.