As gold price climbs, Koreans hit pawn shops with scrap and trinkets
Published: 01 Apr. 2023, 07:00
Updated: 03 Apr. 2023, 09:26
Seventy-three-year-old Yoo Geum-ja visited a pawn shop in Jongno District, central Seoul, on March 23, clutching a bag which turned out to contain a cluster of gold possessions, from gold rings to gold crowns.
“I came to sell before it was too late — I heard that price of gold increased,” Yoo told the shop owner.
Yoo earned 350,000 won ($269.71) through her sale.
In the midst of economic uncertainty, the price of gold is soaring — but more people want to sell their gold possessions in the Jongno area, known for its cluster of jewelry and pawn shops.
The gold price has risen to 353,000 won per 3.75 gram gold bar, according to Korea Gold Exchange Friday.
In March 2013, the price was 227,000 won per bar. Analysts say that while the gold price has had its up and downs, continued economic slowdown has led to a flight to quality, leading to a rise in price. The current price is a jump of 55 percent compared to the 227,000 won in March 2013.
The price fluctuated below 300,000 won between 2013 and 2020.
In January 2022, it broke through the threshold of 300,000 won. Recently, the gold price has been hitting new highs.
A fifty-five-year-old jewelry store owner who has been running his shop in Jongno District for 20 years said that more customers come for sell than purchase.
“Customers come in to sell all kinds of gold with all sorts of stories attached to them — such as bracelets, rings, coins, badges, cards, even a gold key given to the person to commemorate 20 years of service to his company,” he said. “Gold crowns, which are usually made with gold alloys, are only worth around 10,000 to 20,000 won and don’t leave the seller with much, but it’s sad to see elderly asking me to buy them.”
A 28-year-old employee visited a shop in the Jongno area to sell a cellphone strap accessory with a gold pig on the end. He got 150,000 won for it.
“My ex-girlfriend gave it to me as a present, but I'm selling it to contribute to monthly rent, which recently went up," he told a reporter.
Among younger people, in their 20s to early 40s, they are even selling gold trinkets to sell online. They contact online pawn shops, which send price estimates for the jewelry, then send the gold to the shops via mail. They receive the money via direct deposit.
Gold banking is another popular form of investment. The total gold balance at banks, including KB Kookmin, Shinhan and Woori, was 513.9 billion won on March 24. The figure went up 10.8 billion won compared to 503.1 billion won in December.
Gold can be sold anywhere in the world, and it’s easy to liquidate to cash. However, the value of gold rises mainly during times of trouble — during a war or financial crisis.
In 2020, the Covid-19 pandemic began, which is still affecting the world today, while Russia invaded Ukraine last year. Trade friction between China and the United States, which shows no sign of abating, contributes to the rising demand for gold and a rising price.
“There is a new term coined — ‘permacrisis’— a compound word of permanent and crisis,” said analyst Baek Seok-hyun at Shinhan Bank. “Geopolitical and economic crisis has now become a norm. Global economic slowdown and the bank liquidity crisis have led to an escalation in the price of gold.
“The real interest rate of the United States and the international price of gold tend to counter one another. As the interest rate plummeted during the year, gold became overpriced. Since it would be difficult for the value of dollar to be maintained this high, as the value falls, the gold price will eventually fall as well.”
An analyst from Shinyoung Securities warns that gold is not a secure form of investment.
“The gold price fluctuates depending on the situation, and it can plummet dramatically," Oh Kwang-young, the analyst, said. “Gold should not be a primary asset and should be considered as a secondary form of investment taken for precaution.”
BY KIM KI-HWAN [lee.jaelim@joongang.co.kr]
with the Korea JoongAng Daily
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