Summary
- It reported that domestic gold trading prices are about 18% higher than international gold prices, reflecting a 'kimchi premium'.
- Due to a gold bar shortage, the Korea Minting and Security Corporation has suspended sales until January next year, and most banks are only selling expensive 1㎏ gold bars.
- Although the rise in gold prices is expected to continue into next year, investors are warned to be cautious about the rapid increase in domestic gold prices and the possibility of convergence with international prices.
Korea Minting and Security Corporation halts sales until January next year
Gold price 'kimchi premium' reaches 18%
The repeated rise in prices has ignited a fever for gold investment. Domestic trading prices are about 18% higher than overseas. Gold bars have become so scarce that purchasing small quantities is difficult.
According to a Korea Exchange filing on the 16th, the spot price of gold rose to 227,000 won per g the previous day. That is about 18% higher than the international gold price (191,470 won). The so-called 'kimchi premium' has emerged as investment demand has poured in following successive record highs. Analysts say concerns over a prolonged trade conflict between the U.S. and China and expectations of falling interest rates are pushing up gold prices.
Gold bars are also surging in popularity. The Korea Minting and Security Corporation temporarily suspended sales of all gold bar products from the 1st. It will stop supply until January 1 next year. As a result, most banks except Shinhan Bank and NongHyup Bank are only selling 1㎏ gold bars priced over 200 million won. Silver bars, which are as popular as gold bars, will be blocked from bank purchases starting next week because the Korea Gold Exchange will halt supply from the 20th.
Even though gold prices have risen more than 50% so far this year alone, the financial sector sees room for further increases. NH Investment & Securities recently raised its international gold price target to US$4,500 per troy ounce. Hwang Byeong-jin, a researcher at NH Investment & Securities, forecast, "The upward trend in gold prices will continue into next year due to the Federal Reserve's easing monetary policy."
However, there are also views that the abnormal surge in domestic prices should be watched carefully. The Korea Exchange notified investors again early this month and last month that "gold prices will eventually converge to international market prices, so caution is needed."
Reporter Kim Jin-seong jskim1028@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
