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Gold bars are displayed at the Korea Gold Exchange store located in Seoul, South Korea.
Amid strong demand for gold, South Korea’s state-run mint is currently facing a shortage of gold bars.
The Korea Minting and Security Printing Corporation (KOMSCO) has recently halted sales of gold bars, citing difficulties in sourcing raw materials. This has disrupted the mint’s typical operations, which involve supplying gold bullion to commercial banks, retail outlets, and online markets.
Reports indicate that gold vending machines across Seoul have run out of small-sized gold bars, as consumers flock to buy the precious metal, viewing it as a secure investment during turbulent times.
“The surge in gold demand in South Korea has prompted banks to briefly suspend sales of gold bars at KOMSCO’s request due to insufficient supply to meet local needs,” noted Robin Tsui, an APAC gold strategist at State Street Global Advisors.
The increased interest in gold is primarily driven by retail investors seeking safe-haven assets amid escalating domestic political instability and concerns over economic and geopolitical uncertainty, exacerbated by trade tensions stemming from former President Donald Trump’s tariffs.
Investors typically turn to gold as a safeguard in times of currency devaluation or stock market volatility.
South Korean President Yoon Suk Yeol is currently anticipating an impeachment decision following his brief imposition of martial law on December 3. In addition, the recent impeachment vote against acting president Han Duck-soo has further intensified political unrest, complicating the leadership challenges faced by the country.
The political upheaval coincides with the anticipated return of Trump to political prominence, which raises the specter of a resurgent trade conflict. This context has intensified the appeal of gold as a hedge against a weakening won, particularly in light of its “rapid depreciation” throughout late 2024, according to Ray Jia, a research director at the World Gold Council.
Investment in gold bars and coins surged by 29% in the fourth quarter of the previous year, totaling 5.9 tons. This spike occurred alongside an 11% decline of the Korean won against the U.S. dollar, illustrating the direct correlation between currency stability and gold demand.
Market analysts have pointed out the underwhelming performance of South Korean equities, pushing local investors towards gold. “If there are fears about currency depreciation or lack of confidence in the stock market, many would gravitate towards gold,” remarked Bernard Dahdah, a precious metals analyst at Natixis.
While South Korea’s benchmark Kospi index has seen a modest rise of 2% since the beginning of December, individual investors withdrew approximately 224.88 billion won (around $155.9 million) from the market during the same period, contrasting sharply with a 10% increase in spot gold prices.
“Gold’s superior returns compared to domestic stocks have significantly increased its demand,” Tsui added.
Challenges in Gold Supply
While the heightened demand for gold is clear, it also highlights ongoing supply chain issues on a broader scale.
The strong demand from the U.S. has resulted in gold being redirected from other countries, as traders prepare for potential tariff impacts on gold imports from Canada and Mexico.
“Regional shortages of gold have emerged, starting with London and now affecting South Korea, as gold flows towards the U.S., creating tighter local supplies,” explained Nicky Shiels, MKS Pamp’s head of strategy.
Korean refineries and wholesalers have likely received offers to buy their entire gold stock at a premium and transport it to the U.S., which impacts local availability.
John Reade, the World Gold Council’s market strategist for Asia and Europe, shared insights about the logistics of gold shipment, stating that traders often prefer to deal in larger kilogram bars, generally found in specific areas of Asia and the Middle East.
He noted that refineries might shift their production focus to these larger bars to meet shipping demands, further complicating supply for smaller gold bars.
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