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Red-hot gold prices get extra kick with 'kimchi premium' in Korea

Published: 14 Feb. 2025, 18:53 Updated: 17 Feb. 2025, 10:54

SHIN HA-NEE
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The price of a gold bar from the Korea Gold Exchange is displayed on a gold bar kiosk screen in Seoul on Feb. 13. [YONHAP]

Gold bars are selling like hotcakes in Korea to the point where buyers are paying extra, the so-called kimchi premium, to get their hands on bullion amid a global price surge.

“A 3.75-gram gold bar is selling at 600,000 won ($417) in cash, and 650,000 won with Onnuri coupons,” said a jewelry shop owner in central Seoul on Thursday, while a flurry of customers came and went asking for gold prices.

“If you’re going to buy one, you’d better hurry — the price has already soared by 15,000 won from yesterday,” the shop owner suggested.

The gold rush is happening worldwide, but Koreans appear to be particularly zealous, if the rapidly surging domestic price tag is anything to go by.

While U.S. President Donald Trump’s tariff threats have been fueling market jitters, leading to the surge in global gold prices, the increase was notably steeper in Korea with the addition of kimchi premiums — a term initially coined to describe the gap between cryptocurrency prices on Korean and global exchanges.

On the Korea Exchange, the price of a one-kilogram (35.3-ounce) gold bar closed at 163,530 won per gram on Friday, continuing its increase after breaching the 160,000 won per gram threshold for the first time ever a day prior at 161,990 won per gram.

On the global market, however, gold traded at 136,130 won per gram on Friday, according to data compiled by the Korea Exchange.

This represents a 16.75 percent kimchi premium added to the Korean gold price.

Amid such a frenzy, investors are looking for a bargain using Onnuri coupons, which can be used as cash at traditional markets and purchased at a price 10 to 15 percent lower than its cash value. The vouchers can be used at jewelry shops located in traditional markets.

“Many customers used their [Onnuri] coupons to buy small gold bars instead of gold rings, since bars are easier to buy and sell as an investment,” said a jewelry shop owner at Namdaemun Market, a traditional marketplace in central Seoul.

Gold is flying off the shelves at commercial banks as well. Throughout the first 12 days of this month, five major banks in Korea — KB Kookim, Shinhan, Hana, Woori and NH Nonghyup — sold a total of 30.03 billion won in gold bars, more than double the 12.45 billion won during the same period a month earlier.

Shinhan Bank, which handles about 70 percent of gold bar transactions made through commercial banks, already sold bars worth nearly 40 percent of last year’s whole gold sales only a month and a half into the new year.

Soaring demand has stretched the gold supply thin, resulting in the Korea Minting, Security Printing & ID Card Operating Corporation (Komsco) halting the sale of gold bars on Wednesday, citing a supply shortage.

“We are temporarily halting gold bar sales due to a raw materials supply issue,” wrote Komsco in a notice on its website. It plans to resume sales as early as April.

Hana Bank has already sold out of its 10-gram and 100-gram gold bars, depleting all of its stock acquired from both the Korea Gold Exchange and Komsco. Woori Bank has only one-kilogram gold bars from the Korea Gold Exchange left available for sale, as customers are opting for smaller pieces for their accessibility.

As silver also soared in demand due to a spillover effect, the Korea Gold Exchange halted the supply of silver bars on Friday.

“Investor preference for safe-haven assets is expected to continue for a while due to uncertainties surrounding the U.S. tariff policies,” said Lee Young-hoon, an analyst at Samsung Securities.

Hwang Byeong-jin, an NH Investment & Securities analyst, also noted, “Inflation uncertainties under the second Trump administration have been pushing up the prices of gold and silver.”

While uncertainties surrounding Trump’s policies are pushing the market toward safer assets, higher tariffs, which may stimulate inflation, further incentivize investors to buy gold to hedge against inflation.

“Unless the United States takes a turn toward monetary tightening in the future, we maintain our view on expanding holdings of valuable minerals such as gold and silver,” said Hwang.

“A recent surge in domestic demand for physical gold has been resulting in added premiums [in Korea],” said an official from the Korea Exchange, adding, “We issued an investor alert as the gap between domestic and global gold prices expanded to more than 6 percent.”

As such, experts are warning against an overheated market.

“I believe that the recent increase in gold prices in January and February has been largely driven by the speculative demand, rather than a genuine preference for a safe-haven asset,” suggested LS Securities analyst Choi Jin-young.

“Considering that not only the nominal price but also the inflation-adjusted price of gold reached record highs, the situation calls for caution,” said Choi.

BY KIM YEON-JOO, SHIN HA-NEE [[email protected]]