Local neighborhood "committees" (BCs) are a popular way to save for gold. But what happens if the price doubles midway through?
How a Gold Committee Works
In a traditional Pakistani "committee" (a Rotating Savings and Credit Association), a group of women pool a set amount of cash every month. One person takes the total pot each month to buy a gold set. This forces disciplined saving.
The Price Volatility Risk
The major flaw in a cash-based committee for gold is price volatility. If you are the last person to receive the pot after 12 months, the price of gold may have surged by 30%. The cash you receive will buy significantly less gold than the first person who took the pot.
The Solution: Gold-Weight Committees
To hedge against this, sophisticated groups now run "gold-weight" committees. Instead of contributing Rs 10,000, each member contributes the cash equivalent of 1 gram of gold at that day's price. This ensures everyone gets exactly 12 grams of gold, regardless of currency fluctuations.