Article;
Gold Rebounds 1 but Outlook Clouded by ETFs Dollar
Comment;
All the prices,
including gold and stocks, depend upon the level of employment in the economy.
The main reason for fall in gold prices is the recovery of the countries form
recession, especially the US. The stocks market in the US is showing signs of
recovery and people are diverting their resources from gold to stocks, which
(gold) was a good investment during recession. Recently the stock market in the
US has achieved the heights seen in 2007 just before the sub-prime-crisis which
is responsible for the recent gold price crash. Moreover a strong dollar has
kept the demand under check. But in INDIA gold prices are going down because
the economy has touched its limits of expansion. The unemployment rate in INDIA
fell to 3.8% in 2012 and the economy is still handling the hangover. The CPI is
still around 10% which has made gold unattractive because real prices are way
below the nominal prices which is expected to fall with inflation because of
the RBI's commitment of low and stable inflation. Nominal prices (real prices
plus inflation) depend upon inflation and when inflation falls nominal prices
fall too. The nominal prices diverge from real prices because of the objective
of FULL-EMPLOYMENT. Both nominal and real prices increase upto the level of
full-employment but after that only nominal prices increase because production cannot
be increased. And when real prices do not increase people prefer selling
instead of buying because inflation is too high...
No comments:
Post a Comment