This was anticipated!! Globally there are worries from every corner of the world, be it Greece, Italy in EURO Zone or USA. Inflation hasn’t yet stepped on panic button but that can still play havoc in coming days.
Under all this troubles China and India have emerged as strong giants but they too have dark side of their growth story. India faces deficit situation which government is keen on bringing down and figures of 5.5% deficit to GDP was released in recent budget. However bringing down deficit can result in lower stimulus and higher petroleum prices for which the opposition is still creating hue and cry.
China faces the problem of excess supply and reserves. The reserves created by China in 2009 are enough to meet the demand at least for the coming months.
Now one should question that where is the role of Gold in such state of affairs? Gold is a hedge against inflation and ideal for situation like these when all other asset classes are confronting on rise and sustainability.
This is the reason that Gold even after all the negative cues and Dollar at 9 months highs few days back didn’t get the amount of beating it should have from the hands of bears.
Investors usually buy gold as hedge assets against commodities' higher price risk.
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