Although an advisory was issued to exercise caution in investing in domestic gold as the so-called "kimchi premium"—in which domestic gold prices are often higher than international gold prices—has been frequent, it turns out that to invest in gold through bank retirement pension accounts (DC·IRP), investors must buy domestic gold exchange-traded funds (ETFs). This is because among commercial banks, NH Nonghyup Bank is the only one that allows ETFs based on international gold as underlying assets.
Criticism is mounting that banks offer far too few gold investment products in retirement pension accounts, limiting investors' choices.
As of the 26th, according to the financial investment industry, most commercial banks handle only Korea Investment Management's "ACE KRX Gold Spot" as a gold ETF product available in retirement pension accounts. Because this ETF invests in domestic gold spot, investors must fully bear the "kimchi premium" gap that arises when domestic gold prices are higher than international gold prices.
Among the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup), NH Nonghyup Bank is the only one where investors can buy ETFs in retirement pension accounts that track international gold prices. In those accounts, investors can trade Shinhan Asset Management's "SOL International Gold" and Samsung Asset Management's "KODEX Gold Active" ETFs, which can avoid the kimchi premium risk.
Banks handle a limited range of gold investment products because the barriers to entry are high. For a bank to add a specific ETF as a retirement pension account product, each bank must convene a non-deposit products committee and go through internal reviews. Also, because bank accounts use a trust structure that must go through a liquidity provider (LP), real-time trading is not possible. Therefore, if a similar ETF is already in the product lineup, banks are known to be reluctant to add new products.
In the case of gold ETFs, the earliest product, ACE KRX Gold Spot, launched in 2021, has already secured the market lead. An asset management company official said, "There are many gold ETFs qualified to be included as bank retirement pension products, but most banks already carry ACE KRX Gold Spot and seem to judge that no additional lineup is necessary."
As a result, over the past three months (Jul. 24–Oct. 24), net purchases by banks of ACE KRX Gold Spot (including trusts and retirement pensions) reached 272 billion won. That is more than 330 times the combined net purchases of SOL International Gold and KODEX Gold Active (a total of 820 million won) over the same period.
Some say this behavior by banks limits investor choices and leaves investors exposed to kimchi premium risks, increasing the possibility of potential losses.
As of the 24th, the divergence rate between prices on the KRX gold market and international gold prices stood at 2.98%. Although the kimchi premium, which until a few days ago was approaching 20%, has calmed, risks remain. From the 20th to the 23rd, as gold prices fell, the kimchi premium also narrowed, and ACE KRX Gold Spot fell by nearly 6%. During this period, the KODEX Gold Active and SOL International Gold ETFs fell by about 1%.
There is also criticism that banks' product restrictions could cause a "wag the dog" phenomenon. Wag the dog means "a dog's tail wags the body." When investors buy domestic gold spot ETFs, asset managers must purchase physical gold on the KRX market to back them, and if banks' large-scale buying continues, the divergence could widen even further. If international gold prices fall, the premium in the domestic market could also unwind, sharply magnifying the decline.
A financial investment industry official said, "In the case of bank trusts where private bankers (PBs) recommend investments, it is also important whether they gave prior notice of the risks related to the divergence rate when recommending domestic gold spot ETFs in the sales process."