As Gold Prices Rise, "Sell" Trend Emerges: Commercial Banks' Gold Banking Balances Decline

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Amid the ongoing surge in gold prices due to global geopolitical instability, the balance of gold banking accounts at major commercial banks has been declining. This is interpreted as a phenomenon resulting from an increasing number of investors choosing to realize profits amid the elevated gold prices.

According to the financial sector on the 4th, the gold banking balance at major domestic commercial banks (KB, Shinhan, Woori) stood at 614 billion KRW as of the 30th of last month. This represents a 5.3% decrease compared to the same period last year (647.9 billion KRW) and an 11.6% decline from the peak at the end of February this year.

Gold prices have been on a steady rise since last year. This year, factors such as the Russia-Ukraine war, global inflation intensification, the U.S. Federal Reserve’s tightening stance, and lockdowns in major Chinese cities have continued to highlight gold as a safe-haven asset.

According to Shinhan Bank, gold prices were around 1,776 USD per troy ounce (T.oz = 31.1034768g) in early November last year, rose to 1,822 USD at the beginning of this year, and further increased to about 1,992 USD by mid-April. Recently, prices have shown signs of stabilization but continue to fluctuate between 1,850 and 1,900 USD per T.oz.

As gold prices rose, the gold banking balance at commercial banks expanded to 685.2 billion KRW at the end of January and 695 billion KRW at the end of February. However, the gold banking balance, which had been on the rise, reversed to a downward trend, dropping 8.7% month-on-month to 634.1 billion KRW at the end of March and further decreasing by 3.1% to 614 billion KRW at the end of last month.

The industry views this as an effect of investors realizing profits amid the sharp rise in international gold prices. In fact, commercial banks report that there are quite a few cases where sales for profit-taking are being recommended at bank counters.

The financial sector expects that the future direction of gold prices will be determined by factors such as the prolongation of the Russia-Ukraine war and inflation trends influenced by the U.S. tightening policy. A financial sector official stated, "With gold prices maintaining a high level since last year and showing a continuous upward trend, investors are judging that it is time to actively realize profits. Going forward, the movements of gold investors will vary depending on how these risks unfold."

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