South Korea Gold Banking Balances Rise for First Time in Seven Months as Prices Rebound

Balances up 89.5 billion won in a month

Retail investors net-buy 133 billion won of gold this month

As gold prices rebound, demand for gold investment is reviving among South Korean retail investors. With bullion turning higher again and the Bank of Korea resuming gold purchases for the first time in 13 years, individual investors are returning to the metal in a bid to buy at lower levels.

According to the financial industry on Aug. 18, gold banking balances at KB Kookmin Bank, Shinhan Bank and Woori Bank stood at 1.8054 trillion won as of Aug. 13. That was up 89.5 billion won from 1.7159 trillion won at the end of last month. It marked the first month-on-month increase in gold banking balances since January, ending a seven-month stretch of declines.

Physical gold trading is also picking up. Retail investors were net buyers of 133 billion won of gold on the Korea Exchange's KRX gold market so far this month, according to the exchange. That reversed three consecutive months of net selling from May through July. The KRX gold market is a spot market where gold can be traded in 1-gram units.

The financial industry also sees the Bank of Korea's return to gold investment as a factor supporting retail sentiment. The central bank bought more than 350 billion won of gold exchange-traded funds in the second quarter. It was the Bank of Korea's first gold investment since 2013. The central bank also intends to buy additional physical gold.

Rising geopolitical risks have boosted demand for safe-haven assets, while investors also see gold prices as having moved off their lows. International gold prices climbed above $5,500 a troy ounce in January to a record high before falling below $4,000 in late June. They have since rebounded, topping $4,400 a troy ounce again this month.

Banks are also moving to attract customers by lowering the barriers to gold investing. KB Kookmin Bank will cut margins on gold bar sales by as much as 1.0 percentage point starting next month. It also added a 37.5-gram product to a lineup previously limited to 10-gram, 100-gram and 1-kilogram bars. Woori Bank began brokering sales of 3.75-gram and 37.5-gram products last month, expanding its range of smaller offerings. Hana Bank plans to launch a service in the second half that will allow customers to send physical gold as a gift through a messaging platform.

Jang Hyun-joo, Hankyung.com reporter blacksea@hankyung.com