Demand for gold-related bank products declines amid falling gold prices

Demand for bank deposits linked to gold in South Korea has decreased amid the falling trend of gold prices and signs of ecnomic recovery, bank officials said Wednesday. No. 3 lender Shinhan Bank said that it saw the number of new depositors for its main gold-linked products decline by a third last month, compared with the start of this year. The bank's outstanding gold-buying deposits totaled 441.2 billion won (US$412.9 million) last month, down from the value of 506.3 billion won at the end of January, according to Shinhan Bank. Shinhan Bank introduced gold-linked deposits named "Gold Riche" in early 2000, into which customers put their money to invest in the equivalent amount of gold in accordance with changes in gold prices and the won-dollar exchange rates. The prolonged global economic recovery and the U.S. Federal Reserve's quantitative easing were the main drivers for a bull run in gold prices in recent years as the dollar remained weaker against major currencies. But gold prices are on the downward trend amid signs of economic improvement and growing speculation over the Fed's bond-buying stimulus tapering. Volatility of gold prices has increased in recent months, but prices of the precious metal have declined more than 30 percent since October of last year. Gold is widely regarded as a good investment vehicle to hedge inflation, but Korea's consumer inflation remained subdued by running below the central bank's 2.5-3.5 percent inflation target band. Korea's consumer inflation grew 0.8 percent in September from a year earlier, the slowest pace in 14 years, due to falls in prices of farm products.