A 'modern-day gold rush' phenomenon is occurring.
As global financial instability has caused gold prices to surge worldwide, gold sales are becoming active in South Korea through unique channels such as home shopping, convenience store vending machines, and secondhand trading platforms.
Recently, the international spot price of gold has surpassed $2,950 per ounce, setting an all-time high. The domestic gold price has also risen by nearly 30% based on the Korea Exchange's KRX gold market.
Previously, when thinking of 'gold investment,' many would invest in related financial products such as exchange-traded funds (ETFs) rather than in physical gold. However, recently, there has been an increase in demand for purchasing and storing physical gold, even with added value-added taxes and fabrication costs.
Experts analyze that the prolonged invasion of Ukraine by Russia and the instability of international affairs since the administration of former President Donald Trump have led the middle-aged generations, who experienced the gold mobilization movement during the national crisis of the 1997 International Monetary Fund (IMF) financial crisis, to prefer buying gold in physical form.
◇ Shopping for 6.6 million won gold bars while watching TV... 4,000 sets sold in two hours
According to the distribution industry, gold-related sales on home shopping channels have increased since last month. The 30g gold bar from Samsung Gold Exchange, introduced by CJ OnStyle last month, sold about 500 units despite a price of 6.6 million won. CJ OnStyle reports that gold bar sales on TV home shopping channels have increased by 720% compared to the same period last year.
Seeing the better-than-expected response, CJ OnStyle sold gold products again at the end of last month on its T-Commerce channel, CJ OnStyle Plus. T-Commerce is a home shopping service that allows viewers to purchase desired products at their preferred time using a TV and remote control. A CJ OnStyle representative noted that 'the broadcast recorded sales exceeding 270% of our target.'
KT Alpha Shopping also recorded over 1.2 billion won in sales during two broadcasts for 24K gold sales held in mid-last month. The gold products sold during the two hours totaled 4,000 sets. With the rising demand for physical gold, KT Alpha Shopping planned related broadcasts for gold safes as well. According to KT Alpha Shopping, sales of safes reached 130% of their goal. KT Alpha Shopping has since scheduled two more special broadcasts for gold and safes.
Lotte Home Shopping has increased the number of scheduled sales for pure gold-related products by 20% compared to last year. As a result, the order amount for pure gold products has tripled, surpassing 30 billion won.
◇ Investing in gold has become a part of daily life, like withdrawing a drink from a vending machine
Gold has emerged as a hit product in convenience stores as well. GS Retail introduced gold vending machines in 2023 at its convenience store GS25 and supermarket GS The Fresh. These vending machines sell gold in various weights, ranging from 1.875 grams (half a don) to 75 grams (20 don).
Prices are adjusted daily to reflect international gold market rates. Customers can select the desired amount of gold like ordering a drink and receive gold immediately upon payment. Initially, only six stores introduced these vending machines, but this year the number has increased to 30.
Yoon Ji-ho, a merchandise planner at GS Retail, said, 'Because managing high-value precious metals in convenience stores has been burdensome in terms of inventory management and theft, they often sold with advance orders. The gold vending machines have resolved these constraints as demand for safe assets has increased and the trend of micro-investing has spread.'
Recently, many consumers are buying and selling gold on secondhand trading platforms like carrot and Bunjang. These platforms list a variety of gold products, from gold rings to gold bars and dental gold. There are also fairly priced urgent sales appearing at lower prices than the market value.
When purchasing gold products through secondhand trading platforms, customers do not have to pay taxes or fabrication costs. Normally, when buying gold rings or gold bars from jewelry stores, a 10% value-added tax is applied. Jewelers may also charge an additional fabrication fee, which can be as high as 10%, depending on size or complexity.
However, gold sold by individuals is not subject to tax, allowing purchases without the tax burden. To prevent fraud, some platforms impose limits on the transaction amounts for gold. For instance, carrot does not allow buying or selling gold products exceeding 1 million won.
A representative from the Consumer Civic Network said, 'Gold is no different from a commodity. Whether trading secondhand or purchasing from a jewelry store, it is essential to verify the certificate issued by a credible organization.'
◇ Concurrent unease in the global economy and political situation... preference for 'safe assets' held in hand
Typically, when interest rates are lowered, liquidity circulating in the market increases, raising the possibility of price inflation. At the same time, demand for safe assets like gold increases as the value of currency declines.
Former President Donald Trump announced on the 5th (local time) that he would lower interest rates to encourage American corporations to expand production and investment.
Park Sang-hyun, an economist at HI Investment & Securities, said, 'Uncertainty regarding the global economy triggers demand for safe assets.'
Furthermore, experts assess that the preference for physical gold is not just a preparation for economic uncertainty but also a concept of establishing safety measures against international political situations.
Kim So-hyung, a consultant at Davis & Company, said, 'Korean middle-aged individuals experienced the national crisis of the 1997 IMF financial crisis through the 'gold mobilization movement' and tend to perceive gold as a last resort for overcoming economic crises at the national or family level.'
Physical gold is a tangible asset that can be held in one's hand. Unlike stocks or bonds, it does not rely on digital systems or intermediaries. It also provides psychological stability by holding an asset that has a physical presence.
It maintains its value even in crises such as wars or natural disasters. Following the 2011 tsunami in Japan and the Fukushima nuclear disaster, there was also a significant increase in demand for physical gold.
However, there are points to be cautious about when investing in physical gold.
Considering the risks of theft, loss, or damage with large quantities of physical gold, it is advisable to also take out insurance. The costs for insurance or storage can undermine long-term profitability. However, if one avoids adequate insurance due to cost concerns, it could lead to significant financial losses later.
Experts emphasize that one must be aware that physical gold has lower liquidity than gold funds. While gold funds can be traded simply by pressing a buy/sell button, selling physical gold requires finding a buyer.
Especially when quick cash is needed, converting physical gold to cash takes a long time and can be costly. Some purchasing channels impose significant fees and may offer prices lower than the market value.