Gold has been the only commodity which did not see the kind of crash during the global economic downturn in 2008 and 2009. In fact, history tells us that, whenever there is a global or regional uncertainty , then people latch on to Gold to secure their savings.

Few months back , Gold prices dropped to around 800 US dollars an Ounce because the demand for the metal went down drastically. But over the last few months the prices have been rising steadily, and have now hit a multi decade high of 1224 dollars an Ounce. Countries like India and China are now investing part of their trade surplus in Gold instead of investing in US treasuries. All these have been pushing up Gold prices to record high levels.

And once there is a global economic recovery, we can once again expect Gold prices to start moving up because citizens of many countries like China, India and Japan, would love to buy Gold and Gold Jewelry in a big way. Also China and Japan would not be interested in investing all their future trade surplus money into US treasuries, and thus they also would like to invest in Gold. So expect Gold prices to go beyond 1300 or even 1400 dollars in 2010.

India carries the second largest population in the world, with over 110 billion people living in the country. And over 80% of the food production happens based on annual monsoon rains, which failed by over 15% during the middle of 2009.

That has resulted in shortage of food items including grains and pulses and also sugar. The government has been trying to import some quantity of food items from other countries but the kind of quantity India wants is not available in the market.

All these have resulted in the food prices going up by anything between 10% to 80% over the last six months. India is expecting the monsoon rains in 2010 to be normal or above normal, which in turn could pull down the food prices. Indian economy is also doing very well over the last few years, alongside China, which has helped in increasing the food consumption by over 30 billion people. Even a one session increase in food consumption by 10% of the population would mean a 3% to 6% increase in overall demand. And with Indian economy continuing to do well, we can only expect the food demand to keep rising in the coming years.

China was shocked at the end of 2008 when the demand was crashing for Chinese goods across US and Europe. And China suddenly saw a big increase in the unemployment levels in the country due to crash in export related sectors.

And the Chinese government decided to work on increasing the domestic demand as a long term solution. That seems to be paying off over the last one year, when the Chinese economy has seen a massive internal expansion. The government has been forcing the top Chinese banks to lend liberally to individuals and also companies to prop up the economy.

The overall credit expansion in 2009 has been a whopping 52% which even the Chinese government did not expect. That has in fact had all the negative impacts on some sectors like real estate where prices have zoomed by over 30% in most of the Chinese cities. Now the Chinese government is working over night to cut down further credit growth. China cannot abruptly cut down credit growth because it will create a sharp drop in internal demand, which is not affordable.

So expect a slow but steady curtailment in credit expansion by the Chinese authorities. Over the long term China might gain by curtailing the current credit expansion, because it can use that in case of any future global turmoil.