Global Instability and Inflation Haven... Gold Trading Explodes in a 'Gold Rush'

[Asia Economy Reporter Lee Seon-ae] As the unstable international situation surrounding Russia and Ukraine increases stock market volatility, investment demand is pouring into the safe-haven asset 'gold.' Gold prices have been rising day by day, driven by expectations that the upward trend will continue. In particular, with U.S. inflation reaching a 40-year high, gold is expected to be spotlighted as a refuge, fueling a 'gold rush.'

According to the Korea Exchange (KRX) Gold Market on the 19th, as of the 17th, the spot price of 99.99K gold was 72,070 KRW per gram, up 10.79% from 65,050 KRW a year ago. The price of pure gold in a Hando (24k, 3.75g) has also surged recently to 310,000 KRW and continues to exceed 300,000 KRW. On the 17th (local time), gold futures on the Chicago Mercantile Exchange rose 1.6% from the previous trading day to $1,902 per ounce, marking the highest level in eight months since June last year.

Gold trading volume is also on a sharp rise. The daily trading volume of 'Gold 99.99K' on the KRX Gold Market reached 228 kg on the 15th. Compared to a month ago (81 kg), this is an increase of 181%. The total trading volume this year has been 1,199 kg in January and 1,929 kg from February 1 to 17, totaling 3,129 kg. This represents a 45.9% increase compared to 2,144 kg in December last year.

A KRX Gold Market official said, "With concerns about Russia's invasion of Ukraine and ongoing inflation, the preference for the safe-haven asset gold seems to have significantly strengthened," adding, "We expect the KRX Gold Market trading volume to continue growing this year." The total trading volume of the KRX Gold Market increased from 10,713.3 kg in 2019 to 26,201.0 kg in 2020 and 28,295.8 kg in 2021. The average daily trading volume was only 43.6 kg in 2019 but jumped to 105.6 kg in 2020 and further increased to 114.1 kg in 2021.

Gold bars are also selling like hotcakes at the Korea Gold Exchange. The sales volume of gold bars distributed through commercial banks reached 85 kg in January, a 160% increase compared to the same period last year. The Korea Gold Exchange stated, "Recently, inquiries from asset holders about purchasing gold bars have been flooding in through franchise stores, including the Cheongdam branch of the Korea Gold Exchange," adding, "These inquiries are turning into actual purchases, and we are accelerating efforts to secure inventory in response." They further noted, "With steady gold purchases by central banks of major countries and the expected smaller-than-anticipated impact of interest rate hikes, the upward trend in gold prices is being emphasized."

Inflows into gold exchange-traded funds (ETFs) are also steady. Gold ETFs do not hold physical gold but invest in indices that track international gold prices. Investors can open brokerage accounts and trade ETFs in real-time over extended hours, similar to stock trading. According to Bloomberg and Plain Vanilla Investment Advisory, more than 3 trillion KRW has flowed into gold ETFs listed in the U.S. as of the 11th of this year.

However, caution is advised as the second half of the year approaches. Shim Soo-bin, a researcher at Kiwoom Securities, said, "Gold investment is being used more as a means to store assets stably rather than for profitability," adding, "The recent situation reflects rising prices and energy costs, highlighting prolonged inflation, which is driving the price up." He continued, "Since the current price already reflects a significant portion of inflation hedge demand, downward pressure on prices may increase in the second half of the year," urging, "Investors should consider realizing profits in preparation for volatility."

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