Business | Economy
Bullion gains favour as bonds falter
First-quarter gold purchases in China shot up 47%
- Bloomberg
- Published: 00:00 June 2, 2011
Beijing: The fastest inflation in almost three years is driving Chinese investors to gold as bond funds face withdrawals for the first time since 2009.
Gold consumption surged 47 per cent in the first quarter from a year earlier, World Gold Council data show. Industrial and Commercial Bank of China, the world's biggest lender by market value, said it has set up 1.4 million gold-linked savings accounts since introducing them in December. Investors pulled 800 million yuan (Dh452.59 million) from bond funds in the January-March period, after injecting 9.4 billion yuan in the previous three months, said Shanghai-based research firm Z-Ben Advisors.
"A lot of Chinese are buying gold," said Yu-Ming Wang, who oversees $28 billion as the head of Asian fixed-income at Manulife Asset Management in Hong Kong.
Bond rates plateau
Households are increasingly trusting in gold to protect the purchasing power of their savings as government efforts to tame inflation dim the outlook for property and equities. Government bonds maturing in 50 years yield about a percentage point less than the inflation rate, which at 5.3 per cent is similar to the 10-year yield for AAA corporate debt. Five-year time deposits at commercial banks are capped at 5.25 per cent.
Gold consumption in China totalled 233.8 tonnes in the first quarter, up from 158.9 tonnes a year earlier, the World Gold Council reported on May 19. Growth was more than triple the annual average pace of 14 percent since the nation's market for the precious metal was deregulated in 2001.
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