Why to take Gold loan and Why not take gold loans?
Record high prices in the world has resulted in a large number of people taking gold loans. Indian are also taking these loans aggressively. I am not writing the amount of loan taken against gold and gold jewelry in India because the real number can never be known. Indian market and gold loan market is still highly unorganized.
I am trying to compare whether the outright sale of gold is better than taking a gold loan. As a person I hate debt. I general I advise people to sell gold only for the needed amount and not go for a gold loan. My experience life has been that over eighty percent of people taking gold loans are never able to repay the loan. Most of the most people loose their gold due to inability to repay. They also end up paying interest on gold loan. There is a double whammy in the form of interest paid, if you are unable to repay back the loan.
Before you think of taking a gold loan as yourself whether you will be able to repay the gold loan or not. Do the Mathematics first and do it precisely. Think of the sources of income and ways to reduce your expenses or increase your savings before you decide on taking a gold loan. Even if there is a five percent chance that you will not be able to repay the gold loan then go for outright gold sale. Do not be possessive about your gold. You can buy sold gold in future if you are debt free. Savings rate can be increased without any pressure to repay any loan.
Purpose of loan is also important. Gold loan should not be treated at par with a car loan or a personal loan and any other EMI. Gold is for your hard times. Gold is to meet emergency needs. Gold is the most liquid investment. Do not go for gold loan to purchase a car just because interest rate on gold loans is very low. An example for opting for a gold loan is that suppose god forbid, some close to you is hospitalized and you need to deposit money with the hospital. Your credit card/debit card limits are exhausted. Selling stocks will and getting money does take a few days. Opt for a short tenure gold loan. Think of the purpose of taking a gold loan clearly and not vaguely before deciding on taking a gold loan.
If you want to expand your business or profession or buy a house THEN sell your gold or gold jewelery. Some of my very close friends and relatives have sold their family gold jewelery and physical gold to move to their own house (away from rented). Some of them have purchased their own office and left the rented one. Some have sold gold and invested the proceeds in land and real estate. This to me has been a very wise decision. You are not paying any rent in future. This is your imputed savings. BUT use the imputed savings and restart buying physical gold in future.
At the end of the day, it your hard earned. You should decide diligently and free from all encumbrances whether to opt for a gold loan or an outright sale of gold. Do not get swayed by what you read on the internet or what I have written. The future is unpredictable under covid pandemic times. Most people are facing income uncertainty and how long this will continue is also uncertain. Loan sharks are always there to portray a rosy picture of taking a gold loan. NEVER FORGET that when good times come, then start buying physical gold irrespective of the prices.
In my view gold prices will rise over thirty percent every year for the next three years. You also should include my hyper bullish price forecast of gold while deciding on gold loan versus outright sale. Repayment factor is the key. If you are able to repay gold loan in future then just without any two thoughts go for a gold loan. If not then send to trash then slightest thought of taking a gold loan.
Gold jewelery is melted first to know the amount of gold. Then only the gold loan is decided. You also loose on the future cost of making a jewelery whether you opt for a gold loan or you sell gold.
TODAY AND THIS WEEK
This is lackluster global economic data release week. European central bank meeting this week and Brexit is the key. A lot of traders and short term investors are fence sitters. They are waiting for signals from ECB and FOMC over the next two weeks to take a call. Overall trend is still bullish for gold and silver. Corrections will be there. Corrections will be short lived.
COMEX GOLD DECEMBER 2020 – current price $1936.70
- Gold needs to trade over $1920-$1925 zone to rise to $1968.60.
- Sellers will be there below $1930 and crash till Wednesday will be there only if gold trades below $1915.50.
COMEX COPPER DECEMBER 2020 – current price $306.95
Bullish over $303.10 with $312.50 and $318.40 as price target
Bearish below $298.90 with $291.00 as price target
- Copper can rise to $318.60 as long as it trades over $300.60.
- If copper trades over $309 till Friday then chances of $330.10 before the end of the month will be very high.