On January 21, Yonhap News reported that online communities and Naver Cafes are filled with posts such as, "The news says gold prices have gone up, but when I try to sell, the price is completely different," and "I calculated based on the online price, but the actual purchase price is much lower." The article highlighted the gap between perceived and actual gold prices when buying or selling.

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The main reason consumers are confused about gold prices is that different pricing structures are applied when buying and selling gold. Recently, the price difference between buying and selling one don (3.75g) of pure gold has exceeded 160,000 won. The gold prices consumers see on portals or in the news are usually based on international gold prices converted into Korean won, or the benchmark prices suggested by domestic gold exchanges.

Because international gold prices are traded in US dollars, the domestic gold price in Korean won fluctuates with changes in the exchange rate. Even on the same day, if the exchange rate rises or falls, the domestic gold price will also change. Industry insiders explain that the domestic gold price is not an absolute figure, but rather a reference point for guidance. Since each seller has different cost structures and distribution expenses, there will inevitably be differences in the actual transaction prices.

During periods of rapid gold price increases like recently, the purchase price may decrease as more people rush to sell gold. Photo by Kang Jin-hyung

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The biggest misunderstanding in gold trading is that the price difference between buying and selling the same gold is so significant. As of mid-January, major gold exchanges showed that the price to buy one don of 24K pure gold was about 960,000 to 970,000 won, while the selling price was in the low 800,000 won range. Even for the same gold, the difference between buying and selling can exceed 160,000 won.

This gap is not due to arbitrary pricing by gold shops, but rather to structural costs. When purchasing gold, a 10% value-added tax (VAT) is added to the price. In addition, processing fees for making gold bars, labor costs, shipping fees, and distribution margins are included. In contrast, when selling gold, only the gold value without VAT is applied, and processing fees are not refunded. As a result, the purchase price is much lower than the selling price. Industry experts explain that, on average, about 15% in additional costs are added to the purchase price.

During periods of rapid gold price increases like recently, more people rush to sell gold, which can further lower the purchase price. A gold shop employee in Seoul's Jongno jewelry district said, "As gold prices rise, more people try to realize gains by selling their gold," and "Based on the principles of supply and demand, the purchase price is often set somewhat lower than the market price."

Even with the same 24K pure gold, the trading price varies depending on the purity. Most gold bars have a purity of 99.99% (four nines), while gold rings or souvenirs often have purities of 99.9% or 99.5%. Gold with lower purity incurs costs during the refining process, so its selling price is lower. An industry insider explained, "Four nines, three nines (99.9%), and 99.5% all have different prices applied."

Even with the same 24K pure gold, the trading price varies depending on the purity. Most gold bars have a purity of 99.99% (four nines), while stone rings or souvenirs often have purities of 99.9% or 99.5%. Gold with lower purity incurs costs during the refining process, so its selling price is lower. Photo by Kang Jin-hyung

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Considering this structure, industry experts commonly explain that to make a profit from investing in physical gold, the market price must rise by at least 20% above the purchase price. Experts advise that when investing in physical gold, it is more advantageous to choose gold bars over jewelry. This is because rings or necklaces incur high processing fees, and it is difficult to recover these costs upon resale. Additionally, products certified by reputable institutions such as Korea Minting, Security Printing & ID Card Operating Corporation, Korea Gold Exchange, or Samsung Gold Exchange, or those with a Taegeuk mark or hallmark, are more favorable for resale.

Meanwhile, there are also ways to invest in gold through financial products such as gold savings accounts or gold ETFs instead of physical gold. In these cases, the same reference price applies to both buying and selling, making transactions more convenient. However, as these are financial products, the principal is not guaranteed, and capital gains tax is imposed on profits. An industry expert commented, "Although gold prices have surged recently, gold is not an asset for short-term gains," adding, "It is advisable to view gold as a long-term inflation hedge, ideally over a period of at least 10 years."