Argentines catch gold bug as inflation eats away at peso
ARGENTINES are buying more gold than ever to protect their savings from the Western Hemisphere's fastest inflation as the country's bonds suffer the worst returns in developing nations.
While Goldman Sachs Group called for gold prices to peak last month and billionaire George Soros cut his stake by more than half, Banco de la Ciudad de Buenos Aires, Argentina's only gold trader, is talking with mining companies to buy the metal directly as surging demand exhausts its supply of scrap.
The bank began marketing gold to individuals after the nation tightened currency controls in October 2011.
Argentines are turning to the precious metal to preserve the value of their savings as economists forecast the peso will lose more value than any currency in the world and President Cristina Fernandez de Kirchner bans most dollar purchases.
The nation's estimated inflation rate of 26pc is also eroding the value of fixed-income securities, causing Argentina's peso-denominated bonds to lose 5.5pc this year versus a 2.2pc gain in emerging markets, according Barclays.
"I'm buying gold every chance I get," Guillermo Acosta, a 27-year-old security guard, said inside a branch of Banco Ciudad. "With this inflation, I feel like my savings will evaporate if I keep them in pesos."
The nation hasn't borrowed money from overseas debt markets since its $95bn default in 2001 and Fernandez's increasing influence over the economy since her re-election in 2011 has pushed up the interest that bond investors demand to 13.9pc, or three times the average in emerging markets.