RBI On Gold And Housing Prices

wealthymatters.comThe 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.

Gold To Preserve Wealth

Gold is generally believed to be a hedge against inflation.However there has been a spate of articles disputing this belief.I found this nice article here that analysis the relevant data for India http://sachasingh.blogspot.in/2010/01/is-gold-good-hedge.html . The graphs and table below are  extracts from this post.

The graph below shows the movement in WPI and average prices of 10 gms gold in Mumbai from 1970-71 to 2008-09.

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