Gold rush underway as Koreans seek safety, and a bargain
Gold is glittering again as economic fear mounts and Koreans rush toward safe assets.
Volume on the Korea Gold Exchange through April 9 is already half of 2020's full-year trading, with 10,780 kilograms (23,800 pounds) changing hands.
Koreans can purchase gold through brokerage houses, via home shopping channels and online.
"A growing number of people are buying gold since the beginning of the year as the price has been declining," said Song Jong-kil, executive director at Korea Gold Exchange.
Song added that gold for delivery was delayed for about a week last month due to the shortage of physical gold.
The declining gold price is the biggest reason behind the high demand.
Gold traded at 62,990 won per gram (0.04 ounce) on April 15, according to Korea Exchange. Compared to July 28's 80,100 won, when it reached an all-time high, it's down 21 percent. The price of one-kilogram of gold dropped 13 million won to some 72 million won during the same period.
Domestic gold prices are heavily affected by international gold prices and the value of the dollar.
Gold prices are declining even in the international market.
Gold prices at the New York Mercantile Exchange closed at 1725.35 dollars per ounce as of April 13, down 0.87 percent from the previous day. Compared to the end of 2020, it's down 8.3 percent.
Growing inflation woes are another driving force.
When people worry about inflation, gold becomes more popular than cash due to the eroding value. Gold is considered one of the key safe havens.
"Some people say bitcoin can replace gold, calling it 'digital gold,'" said Kim In-eung, manager at Woori Bank's sales team. "But the high price volatility remains an issue."
"In the case of investors who put more importance on protecting their assets than making gains, they prefer gold over bitcoin."
Gold-related financial products are also gaining popularity.
The number of Shinhan Bank Gold Riche gold-buying accounts totaled 163,875 as of April 13, up 12,000 on year. The gold-linked deposits allow customers to switch won to gold.
The bank's outstanding gold-buying deposits totaled 470.8 billion won as of April 13.
Opinions on the future of the gold price are mixed. Some say the price of gold will surge while others believe rising interest rates will take a toll.
"Gold acts as a hedge against inflation and for investors who wish to avoid asset losses," said Shim Soo-bin, an analyst at Kiwoom Securities.
Kim Kwang-rae, an analyst at Samsung Futures, remains skeptical about it.
"As the dollar remains strong and interest rates have been rising, it's unlikely that the price of gold will surge," said Kim.
Na Joong-hyuk, an economist at Hana Financial Investment, warns investors that this might not be the right time to purchase gold as "the price may decrease further."
"The international price of gold could possibly be declined as low as 1,600-dollar mark," said Na.
BY YEOM JI-HYEON, CHEA SARAH [firstname.lastname@example.org]