KB Kookmin Bank raised the investment risk rating of its flagship gold investment product, the KB Gold Investment Account, to level 2 from level 3 as gold price volatility has increased. The bank raised the product's risk rating as the "kimchi premium" emerged, with domestic gold prices running higher than international prices amid a recent gold investment frenzy among domestic investors.
According to the financial sector on the 30th, Kookmin Bank raised the investment risk rating of the KB Gold Investment Account by one notch starting that day. It had been a somewhat high-risk product at level 3, but from that day it was classified as a high-risk product at level 2. Investment product risk ratings are classified from levels 1 to 6.
Typically, products that can incur a total loss of the maximum principal fall into level 2. Funds that invest 80% or more in high-risk assets are representative examples.
A Kookmin Bank official said, "The KB Gold Investment Account is a product whose price fluctuates according to international gold prices and the won–dollar exchange rate," and added, "With the recent increase in volatility in gold prices and exchange rates, price swings may widen, so we changed the risk rating."
With the higher risk rating, customers who want to open a KB Gold Investment Account must visit a branch, take an investor suitability test, and have their risk tolerance confirmed. Only those who receive an aggressive-investor or active-investor rating in the test can sign up for the product.
The KB Gold Investment Account is a demand deposit–type product that allows flexible investment in gold without taking physical delivery. Like deposits and savings, the principal is not guaranteed, and returns can vary widely depending on international gold prices and exchange rate movements. Classifying a demand deposit–type gold investment product as risk level 2 is unusual.
Investors should be cautious as a "kimchi premium," where domestic gold prices are higher than international prices, is occurring now. As of the 26th, the price of 1-kilogram gold bullion on the KRX gold market closed at 179,800 won per gram. The 100-gram bar was 183,190 won per gram. This is higher than the international price of 170,370 won per gram. The KRX gold market is a physical gold market operated by Korea Exchange with approval from the Financial Services Commission.
Korea Exchange projected that KRX gold market prices will see some short-term adjustment and move closer to international prices. In other words, domestic gold prices could fall.
A Korea Exchange official said, "Given that recent KRX gold market prices are forming higher than international gold prices, investors should exercise caution."