Kimchi premium fluctuating 18→8%..."Investors fear losses"

The 'kimchi premium' attached to domestic gold prices is fluctuating. The premium, which at one point approached 20%, plunged to the 8% range in a matter of days. If the gap between domestic gold prices and international gold prices experiences sharp swings, investors who bought at the peak are more likely to see short-term losses.

On the 21st, according to the Korea Exchange, the KRX gold spot closing price was 210,000 won per gram, which was 8.88% higher than the international gold price (192,860 won). The kimchi premium phenomenon, where domestic gold trades at a higher price than international gold, widened to a price gap of 18.55% on the 15th, but it fell to single digits in just a few days.

Exchange-traded funds (ETFs) that invest in KRX gold spot have also seen declining returns. Over the past five trading days (Oct. 14–20), the returns of domestic representative gold spot ETFs 'TIGER KRX Gold Spot' and 'ACE KRX Gold Spot' were -4.18% and -4.07%, respectively. In contrast, 'SOL International Gold' and 'KODEX Gold Active', which track international gold prices, posted gains in the 2% range during the same period.

Analysts say the rapidly rising domestic gold price is taking a breather because profit-taking emerged after the short-term surge. Another reason is that growing concerns over the kimchi premium have led investors to turn to products related to international gold.

In fact, individual investor funds flowing into international gold ETFs have increased recently. KODEX Gold Active saw net inflows of 88.3 billion won over the past five trading days. Its net assets also grew from 135 billion won to 216.9 billion won during this period, an increase of over 60%. Individual investors also net-bought 48.2 billion won worth of SOL International Gold. The product's net assets also rose from 33.6 billion won to 80.2 billion won, a 127% increase.

KRX gold prices are formed mainly around domestic market bids, so if demand concentrates in a short period, a gap with the international price can occur. This is because it takes considerable time for imported gold to clear customs and undergo quality inspections before entering the KRX gold market. Because supply differs, a premium naturally arises — the kimchi premium.

Industry concerns have been raised that investors could incur losses during the kimchi premium's sharp fluctuations. An industry asset management official said, "The domestic gold spot market is highly volatile, as it must consider not only interest rates and exchange rates but also the kimchi premium variable," adding, "If situations in which the premium rises sharply and then falls are repeated, investors who bought at the peak could incur losses."

Although there may be short-term adjustments, the securities industry expects gold prices to trend upward in the long term. Oh Jae-young, a KB Securities researcher, said, "Due to factors such as expectations of the U.S. central bank (the Fed) cutting rates by year-end, inflows into gold ETFs, and continued central bank buying, the uptrend could continue without major corrections."

Yang Ji-yoon, reporter yang@hankyung.com