Gold Trading Six Times Taller Than 63 Building... 'Gold Rush' from Youth to Institutions

KRX Gold Market Grows 34 Times in Size 6 Years After Launch
Trading Volume Exceeds 30 Tons This Year, First Time on Annual Basis

[Asia Economy Reporter Lee Seon-ae] The trading volume of the KRX Gold Market is expected to exceed 30 tons this year. If it surpasses 30 tons, it will be the first time on an annual basis since the market was established in 2014. The trading volume recorded up to the first half of this year is 15.5 tons, which, if all withdrawn as 1kg gold bars and stacked vertically, would reach approximately 5.9 times the height of the Yeouido 63 Building (289m). As astronomical funds were released as measures against the COVID-19 pandemic, asset prices inflated, and demand for the safe asset gold exploded. In particular, the younger generation in their 20s and 30s jumped into gold investment.

According to the Korea Exchange on the 12th, the average daily trading value of the KRX Gold Market in the first half of this year was 8.26 billion KRW, an increase of 13.8% compared to the previous year. Since its establishment in 2014 with 240 million KRW, the market size has grown 34 times in six years, maintaining an average annual growth rate of 82%.

The trading value in 2020 was 1.8013 trillion KRW, more than tripling compared to 2019, and in the first half of this year, it showed a high growth rate with 1.016 trillion KRW, a 43% increase compared to the same period last year (710.3 billion KRW). The total cumulative trading value from the market’s inception to the first half of this year reached 4.225 trillion KRW, surpassing 4 trillion KRW for the first time.

The Korea Exchange expects the annual trading volume of the KRX Gold Market to exceed 30 tons this year. The annual volume first exceeded 10 tons in 2019 and surpassed 20 tons last year. This year, the Korea Exchange forecasts that the market can take another leap forward. The Korea Exchange emphasized, "The KRX Gold Market shows a high growth rate even compared to over-the-counter markets (7% growth in 2020 based on sales) and major overseas exchanges."

The background of market growth includes increased interest and demand for gold as a safe asset due to factors such as the COVID-19 pandemic, the rapid fluctuations of cryptocurrencies, and ongoing conflicts between the U.S. and China. Additionally, major advanced countries’ central banks hold large amounts of gold, and emerging market central banks are expanding gold purchases, which also influenced the trend. Furthermore, as consumer price inflation has increased, concerns about inflation have highlighted gold as an inflation hedge.

The formation of a market centered on diverse investors is also a growth factor. Initially, individuals accounted for 92.4% of purchases and physical businesses 83.0% of sales, but the market is gradually evolving into an investment (distribution) market with various participants. In the first half of the year, the trading proportions by investor type were 50.1% individuals (down 10.4 percentage points from the previous year), 34.4% physical businesses (up 12.9 percentage points), and 15.5% institutions (down 2.5 percentage points).

The influx of younger generations is also positive. Among individual investors who opened general product accounts (consignment accounts) at securities firms to trade in the KRX Gold Market, 51.8% (based on the number of consignment accounts at 10 securities firms participating in the KRX Gold Market as of the end of March 2021) are aged 30 or younger. Since market participation decreases with age, this is considered an important factor driving future growth. The Korea Exchange interpreted this as reflecting a change in perception of gold as an investment target, with the 20-30s generation, who are familiar with securities markets and recognize gold as a safe asset, participating, unlike older generations who purchase and store physical gold themselves.

Other factors behind market growth include tax benefits, low fees, and convenient trading with easy storage and withdrawal. The KRX Gold Market imposes no tax on capital gains and grants value-added tax exemption for on-exchange transactions. It boasts the lowest trading costs compared to other markets. Fees are also considered reasonable, with a total burden of around 0.3%.

Trading convenience is also high. Trading is as easy as stocks through 10 securities firms including KB Securities, NH Investment & Securities, Daishin Securities, Mirae Asset Daewoo, Samsung Securities, Shinhan Investment Corp., Yuanta Securities, Kiwoom Securities, Hana Financial Investment, and Korea Investment & Securities. Small investments in 1g units are possible. Storage and withdrawal are also free. Gold purchased in the KRX Gold Market is safely stored at the Korea Securities Depository, and a withdrawal fee of 20,000 KRW per 1kg applies when withdrawing physical gold. In contrast, over-the-counter markets do not guarantee safe storage, and Gold Banking incurs a withdrawal fee of about 4-5% (approximately 2.7 million KRW/kg) when withdrawing physical gold.

This content was produced with the assistance of AI translation services.