Gold’s Price Surge Skews Inflation Numbers Across Asia

Birthday Gifts

 

In South Korea, where President Lee Myung Bak has declared “war” on inflation, a 29 percent jump in the cost of gold rings pushed inflation past 5 percent for the first time in three years in August. A tradition of giving what is called a “Dol” ring as a gift for a child’s first birthday is a factor.

In Indonesia, gold jewelry was the biggest contributor to a 0.93 percent increase in consumer prices in August from the previous month, accounting for 0.19 percentage point of the gain, government data show.

The issue doesn’t arise in developed nations including Japan, the U.S. and the U.K., or in Asian economies such as Singapore, Vietnam and Hong Kong where the metal is absent from inflation baskets or jewelry has a limited effect. Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., said gold’s influence on China’s inflation rate via the personal ornaments category is “tiny.”

While gold and gold ornaments have a weighting of just 0.36 percent in India’s main index, a 52 percent jump in prices for that category was enough to push up the headline inflation rate in August. With gold, the wholesale price index climbed 9.78 percent in August from a year earlier. Without, the increase would have been 9.49 percent, according to ICICI.

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