Bucking the global trend, South Koreans pile into gold
Reuters , 5 Aug 2015 16:45
(Minews) - South Koreans are on course to buy a record amount of gold in 2015, worried that a meltdown in China's stock markets will destabilize South Korean equities and keen to replenish a traditional store of value in an era of low interest rates.
In contrast to the weak demand in top gold buyers China and India, South Koreans are on target to buy 1 trillion won ($860 million) in bullion for the first time this year, based on first-half sales through Korea Gold Exchange 3M Co Ltd, the country's largest gold merchant.
South Korea accounted for just 17 tonnes of gold demand in 2014, according to the World Gold Council, a far cry from the 974 and 811 tonnes in China and India respectively, so the revival in buying will do little for global bullion, but it could add to the depression on the domestic stock market.
Song Jong-gil, general director for sales at Korea Gold Exchange 3M, said that of the more than 500 billion won of gold sales the company made in the first half of 2015, more than 20 percent went to financial investors in the form of thin cards and bars ranging in weight from 1 gram to 1 kg.
"Low interest rates are the biggest reason. And gold is preferred to stocks and real estate thanks to high liquidity," Song said, adding sales picked up as bullion dropped below $1,100 an ounce.
Volume hit 27.76 kg on the Korea Exchange bourse on July 20, the second-highest daily volume since trading started there in March last year, as retail investors hunted bargains.
Global bullion hit $1,077 an ounce last month, a 5-1/2-year low, and was at $1,084 on Tuesday, depressed by the prospect of higher U.S. interest rates and weak demand in major markets.
Koreans have long seen gold as a store of value and a safe haven and are estimated to hold around 800 tonnes in households and private vaults.
During the 1997/98 Asian financial crisis, the authorities launched a campaign to buy gold from patriotic individuals, selling it on to get dollars to bolster foreign reserves.
"Lots of people sold gold during the Asian financial crisis. Then prices surged and many were unable to buy back," Song said. "Now people are buying gold rings and small bars, thinking prices have fallen a lot and it's a good time to buy."
The country's largest gold wholesale and retail markets centered in the Jongno district of Seoul are doing good business.
"Some individuals are buying a lot of gold at Jongno - some about 40 million won a day as prices have been falling. They resell in black markets without paying taxes," said Ohn Hyun-sung, head of Wolgok Jewelry Research Center.
Story Code: 26596
News Link: http://www.minews.ir/en/doc/news/26596/bucking-the-global-trend-south-koreans-pile-into-gold