Korean gold rush: 'Kimchi premium' for safe-haven asset hits record 20%
Mon Feb 17 2025
A sharp surge in demand for gold has raised the “kimchi premium” on the price of the safe-haven asset, driving the gap between gold prices in South Korea and international markets to over 20 percent.
While the term “kimchi premium” has been mostly used recently to refer to price gaps in cryptocurrencies, now even gold has become subject to the phenomenon, as local investors flock to the asset to hedge against fears of trade wars and geopolitical uncertainty sparked by US President Donald Trump.
The spot price of a 1-kilogram gold bullion stood at 168,200 won ($117) per gram at around 1 p.m. on Friday on the KRX Gold Market. The Korea Exchange operates the gold bourse, where the precious metal is traded like an equity.
At the same time, the LBMA Gold Fixing price, operated by the London Bullion Market Association, was 135,000 won per gram, showing a price gap of over 24 percent. The KRX uses the price offered by the LBMA, the leading authority on gold and silver markets, as its indicator of the international price of gold.
The price of spot gold on the KRX Gold Market closed trading at 158,000 won on Monday, down 3.4 percent from the previous trading day and reducing the price gap slightly to around 18 percent.
Friday's surge marked the first time for the price discrepancy to widen beyond 20 percent since the KRX Gold market was first launched in 2014. The KRX issues an alert about the price gap when it widens to over 6 percent, and the warning has been issued every day since Feb. 4.
The buying spree for gold has been fueled by economic uncertainties associated with Trump's tariff policies. On Friday, the daily trading volume of spot gold on the KRX Gold Market surged to 135.1 billion won, the largest total since the market was launched in 2014.
The top five banks here sold gold bars worth 40.6 billion won from Feb. 1 to 13, nearly 20 times the amount they sold in the same aperiod last year. The frenzy followed an announcement that the Korea Minting and Security Printing Corp. temporarily halted sales of gold bars due to supply issues earlier this month.
Market analysts have warned against the local market’s excessive demand for spot gold.
“In the past, rallies in gold driven by its appeal as a safe-haven asset were only valid in the short term, and prices reverted in time. The risk-hedging demand could weaken soon," said economist Ha Keon-hyeong at Shinhan Securities.
"The sharp surge in local demand has widened the price gap between KRX spot gold and international gold prices. This could prove a short-term stressor when the price normalizes in the future. It would be wise to replace such investments with international spot gold or gold futures," said analyst Lee Young-hoon of Samsung Securities.
Source: https://www.koreaherald.com/