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RBI On Gold And Housing Prices

August 24, 2012 Leave a comment

The Reserve Bank of India is worried about the rapid rise in housing and gold prices, out-running the inflation rate.

”The two markets have not only provided effective inflation hedges, but also enabled savers to earn good real returns amidst high inflation.”

Over the last two years housing price inflation has ranged between 16 – 25% during various quarters. Gold prices have increased at an even faster rate of 14-40%.

However, with housing and gold prices running ahead of inflation, there is a need for containing risks,according to the RBI.

‘While credit to housing and commercial real estate has slowed down, a close vigil is still necessary as housing price inflation has not moderated.”Hence the Reserve Bank will continue to monitor the asset prices ahead from a macro-prudential angle.

Filed under Precious Metals, Tool Kit Tagged with asset price inflation, gold investing, gold returns, high inflation, Inflation, inflation hedge, postaday, real estate investing, real estate returns, Real Returns

Confusing Real Wealth And Paper Wealth

May 29, 2012 9 Comments

Often people see the SENSEX/NIFTY values,property prices etc. and the GDP as one and the same or as proxies for each other.After all if the economy is good, the GDP and stock indices , property prices etc. are expected to rise.By doing so people are confusing real wealth and paper wealth.This confusion especially happens to people who own stocks.And today an increasing number of people own stocks,if not directly than through mutual funds.Incidentally, even debt mutual funds might have an equity component.In the insurance front, not just ULIPS but also the bonuses in traditional products are dependent on stock market returns.Blended funds in child plans and pensions also have an equity component.So today, many people with no intention of dabbling in stocks still have an equity exposure and are prone to confusing the rise in paper wealth due to valuation gains with a rise in real wealth. Read more of this post