I am really surprised at the new found zeal exhibited by select Central Banks in buying Gold even at the prevailing historic price levels.

India bought 200 tons in October 09, Mauritius two tons in November 09 and Sri Lanka 10 tons yesterday!

I also note that none of the other countries have joined this Gold buying band wagon at this stage.

And I would not like to accept any reasoning that those who bought now Gold have riches / reserves and others who have not, do not have such riches / reserves.

I would like to make clear at the outset; I do not wish to question the wisdom of these central banks diversifying its reserves and investments.

But what really surprises me, these central banks buy Gold at a time, when the retail interest has gone remarkably down due to prevailing high prices and the physical retail bullion market is experiencing the fall out – reduction in volumes in business.

As a corollary, when the physical retail interest goes down, it would impact the price of Gold and bring it lower.

When the given back ground is bearish bullion prices, central banks stepping in and buying gold caused the surprise.

There is a view emerging in the market place, that while the global economic recovery is gathering pace, in a context of very loose and monetary policies pursued by the world economies, there is a fear about new asset bubbles forming.

According to Economist Intelligence Unit, this seems to be happening in the Asia already – the region leading the global recovery and property and stock markets are surging, particularly in China. By September 2009, the regional stock markets are up around 50% over end 2008 levels. Real estate prices have soared in recent months in China, Hong Kong and Singapore.

The countries in this part of the world – Asia – have realised that they have to start tightening monetary reins by slowly withdrawing stimulus measures as they are directly contributing to the inflationary situation. But the local pressures are preventing the withdrawal of stimulus programmes. And this builds up the asset bubble.

Ok. That is all about asset bubble formation and the lurking fear on its burst. Let us move on.

During the last year’s financial crises, crude oil prices hit a record of $147.27 per barrel and there were many predictions at that time on its further going up to $1,000 per barrel. (Did I hear them correctly?)

However, subsequently, we have seen the levels of crude oil prices falling from the record high of $147.27 a barrel recorded on July 11, 2008 to a level of $30.28 a barrel in December 23, 2008 – in less than six months!

Going by this, I may not be surprised if the Gold falls to a level of $252 per troy ounce from its present peak of $1200 per troy ounce (if it is assumed that the price of Gold may not go beyond $1200 and the correction takes place at this price. Also the Gold price correction also traces the same levels as in Black Gold – crude oil price correction by 79 %!)

Any takers?