Gold Rebound Revives Haven Demand as Gold Accounts, ETFs Draw Fresh Inflows

Money flows into related ETFs

Central banks are buying, too

A rebound in gold prices has lifted balances in gold bank accounts for the first time in seven months. Buying of gold-linked exchange-traded funds has also picked up, putting gold investing back in focus. Banks are expanding related services, including mobile gold bar sales, as they compete for customers.

Balances in gold banking accounts at KB Kookmin Bank, Shinhan Bank and Woori Bank stood at 1.8362 trillion won, or about $1.33 billion, as of Aug. 27, according to the financial industry on Sept. 2. That was up about 7%, or 120.3 billion won, from 1.7159 trillion won at the end of July. The increase marked the first monthly gain since January. Gold banking accounts allow customers to buy and sell gold in units as small as 0.01 gram based on market prices. In South Korea, only those three banks offer the product.

Gold ETFs are also attracting fresh money. Retail net buying of ACE KRX Gold Spot has exceeded 200 billion won this year. In August alone, more than 65.5 billion won flowed into the fund.

Investor sentiment has improved as gold prices rebound after a sharp correction. International gold prices climbed above $5,500 a troy ounce in January, a record high, before sliding below $4,000 at the end of June. After moving sideways for about a month, prices began rising again in August and have now topped $4,600. In the financial industry, expectations are growing that gold will reclaim the $5,000 level before year-end.

Gold's renewed appeal has also been supported by the U.S. Treasury's move to consider expanded buybacks of long-term government bonds. The Treasury is reviewing a plan to deploy $1 trillion in cash to buy long-dated Treasuries after total U.S. debt topped $40 trillion for the first time and long-term bond yields surged to the highest level in 20 years. Concerns that such a plan could weaken the dollar have driven money into gold, another traditional safe-haven asset.

Purchases by major central banks are also supporting the market. Net gold buying by central banks worldwide rose 62% from a year earlier to 288.9 metric tons in the second quarter, according to the World Gold Council. Hwang Byung-jin, head of FICC research at NH Investment & Securities, said gold buying by global central banks seeking to diversify reserve assets will accelerate. He added that investment demand would likely rise further on expectations that gold will return to $5,000 this year.

As interest in gold picks up again, banks are stepping up efforts to attract customers. KB Kookmin Bank will begin selling gold bars through its app on Sept. 10. Hana Bank also plans to launch a service later this year that will allow even noncustomers to send physical gold as a gift through a messenger platform.

"Funds are rapidly flowing into gold products as prices rebound," an official at a commercial bank said. "Because taxes and fees differ by investment method, investors should choose products that fit their goals and time horizon."

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