Buying gold with borrowed money? Read this first!

Dubai: Gold has long been a symbol of wealth and financial security, and with its value steadily increasing over the years, many people see it as a safe investment. But should you take on debt to buy gold?

Whether it’s a personal loan or a credit card, borrowing money to invest in gold is a decision that requires careful thought. Let’s explore the risks and alternatives to ensure you make a wise financial move.

Gold prices keep rising—but is it worth borrowing for it?

Historically, gold prices have risen over time, making it an attractive investment. Even during economic downturns, gold often holds its value, and demand increases, especially around festive seasons. For those short on cash, banks and financial institutions offer loans specifically for buying gold. But is this a smart way to invest?

As of March 18, 2025, gold prices have reached record highs, with spot gold hitting a peak of $3,038.26 per ounce. In Dubai, the price for 24-Karat gold is approximately Dh365.25 per gram, and 22-Karat gold is around Dh338.25 per gram.

According to Georgina Effel, a UAE-based gold investor-turned-analyst, borrowing money to buy gold at these high prices isn’t advisable. “With gold trading at record highs, taking on debt for gold is a risky move,” she warns.

Even if prices drop, Effel still cautions against borrowing to buy gold. “Though gold can provide extraordinary returns, the high-interest costs make borrowing unattractive. Market volatility can quickly wipe out profits, leaving you in debt with nothing to show for it.”

Should you use a loan or credit card to buy gold?

Despite the risks, some people still consider borrowing to buy gold. But if you’re determined to do so, what’s the best way to go about it?

A personal loan might seem like a good option if interest rates are low and gold prices are rising rapidly. In theory, if gold appreciates faster than the loan interest, you could profit. However, not everyone qualifies for a low-interest loan, and if gold prices drop, you could be left with a debt larger than the value of your investment.

On the other hand, using a credit card can be even riskier due to high interest rates, often ranging from 14% to 30%. Financial expert Shino Thoma, an India-based banker specializing in gold loans, warns that borrowing for gold is only viable if you plan to hold onto it for a long time. “Short-term investments in gold are highly unpredictable. If the price drops, you could lose money fast.”

Is borrowing to buy gold ever a good idea?

Looking at past performance, gold prices have increased significantly in the past year. That might seem like a strong return, but zoom out to the past decade, and gold’s annual return has been modest—potentially less than the interest you’d pay on most loans.

So, should you take a loan to buy gold? The answer depends on your risk tolerance and financial situation. If you can secure a loan with an interest rate lower than your expected returns, it might be worth considering—but only if you’re prepared for the risks.

Bottom Line: Invest wisely

Gold remains a solid asset for diversifying your portfolio, but buying it with borrowed money is a gamble. Effel’s advice? “Invest your own money, and only buy gold when prices dip.” While gold has provided substantial returns over the past decade, it’s crucial to invest wisely—without the added stress of debt.

If you’re eager to invest in gold, the best strategy is to buy small amounts over time, avoid market speculation, and most importantly, use money you can afford to invest—not borrowed funds.

Note: Gold prices are subject to change due to market fluctuations. Always consult current rates before making investment decisions.