By Yoon Ja-young
Staff Reporter
Consumer prices of gold are soaring as global liquidity turns to safer assets following the capital market turmoil. Fund products investing in gold are performing exceptionally well on the sluggish financial market.
According to the Korea Jeweler's Association, the consumer price of gold breached 150,000 won per ``don'' (3.75 gram) this week, rising over 15,000 won compared with the price in January.
Koreans traditionally present a gold ring on a baby's first birthday, but this has become too expensive a gift.
People are picking other gifts in place of gold. According to a survey by Lotte Department Store, only one out of five customers said they prefer gold as a gift for a baby's first birthday. Over 70 percent said they would give cash.
International gold prices have been stabilizing on the outlook that demand will decrease following the global economic slowdown. Gold, oil and other commodities have seen prices falling. However, as the market came to focus on safety again following the fall of major investment banks on Wall Street, their prices rose again.
While the fund market is suffering an investment loss, gold funds are an exception. Shinhank Bank's fund recorded a near 16 percent investment return during the last week thanks to soaring prices. Another fund sold at Industrial Bank of Korea recorded over a 14 percent return. The number of accounts for this fund product has also expanded by over 50 percent so far this year
However, analysts advise investors to keep in mind that the price of gold is highly fluctuating due to speculators on the global market. Gold funds could be a good option when it comes to diversification of portfolios, but it shouldn't make up too much of it, they said.