Over fears of the astronomical 26 percent inflation rate could hurt their wealth; savers in Argentina are turning to gold as a safe haven. It has been reported that Argentines are buying more gold than ever before.
According to Bloomberg News, the Banco de la Ciudad de Buenos Aires is in negotiations with mining companies to purchase gold directly as strong demand is depleting its inventory. The bank is the only bank in Argentina offering gold bullion coins.
Following the Argentine government imposing stricter currency controls in late 2011, the bank started to offer gold to its clients. In one year, it sold 280 kilos of gold worth approximately $20 million.
The news article quoted one man as saying, “I’m buying gold every chance I get. With this inflation, I feel like my savings will evaporate if I keep them in pesos.”
Since the Argentina central bank is printing an exorbitant amount of pesos, the amount of pesos in the overall economy has grown 38 percent in the past year. Experts are forecasting that the Argentine peso could lose roughly 12.9 percent of its value, which is more than any other currency in the world at the present time.
The national inflation rate stands at about 26 percent, even though the statistics published by the government pegged it at 10.8 percent in 2012, which received staunch criticism from the International Monetary Fund (IMF). President Cristina Fernandez de Kirchner has imposed a prohibition on purchases of United States dollars.
In an effort to fight off inflation, the Argentine government announced in February that it would apply a two-month price freeze on all products sold in all of the country’s major supermarket chains.
Within a few days of the price control measures, there were reports of food shortages and supermarkets were only offering certain products or limiting the maximum number of purchases. Government officials immediately refuted all of the stories that contained such information. Regardless, economists are warning about the long-term consequences of the measures taken by public leaders.
At the time of this writing, gold is trading at $1,605.90.