Korea’s Gold Rush: Prices Surge Amid Global Uncertainty

By Stephanie Kang, Yewon Kim 

Gold prices in South Korea have surged nearly 40% this year, sparking a rush among investors to secure their share of precious metal. This rapid rise has not only fueled demand for gold savings accounts (Gold Banking) and gold bars but also intensified a uniquely Korean phenomenon known as the ‘Kimchi Premium.’ As market dynamics shift and volatility, what does this gold rush mean for the future of Korea’s financial landscape?

According to financial industry sources, as of the 10th of September, the combined balance of gold savings accounts at three major commercial banks in South Korea— Kookmin, Shinhan, and Woori Bank— reached 12.319 trillion won(885 million USD). This marks a sharp increase of nearly 4.5 trillion won in inflows since the start of the year, as thousands of new accounts were opened. Sales of gold bars, a product traditionally favored by high-net-worth investors, have also increased by more than doubled compared to last year, with banks reporting nearly 3.3 trillion won in transactions by early September. On the trading side, prices on the Korea Exchange (KRX) climbed to a record 167,740 won per gram, up more than 30% from late 2024, pushing the retail price of a single don (3.75 grams) ring to about 730,000 won. Globally, futures on the New York Commodity Exchange broke through the symbolic $3700 per ounce mark for the first time, and analysts now warn the prices could test the $4000 level by year’s end. 

Goldman Sachs, one of the world’s largest and most influential investment banks, has  also weighed in on the recent surge in gold. In a recent analysis report, the firm warned that if even 1% of the privately-owned U.S Treasury market flows into gold, prices could rise to nearly $5,000 per troy ounce. The bank emphasized gold’s unique role under current risks, calling it its ‘highest-conviction long recommendation’ amid uncertainty over Federal Reserve independence and global monetary stability. These developments highlight the unprecedented scale of both domestic and international demand, underscoring why gold prices are surging to historic levels.

Gold prices in Korea are soaring due to both global and domestic factors. Expectations that the Fed will cut interest rates have lowered the opportunity cost of holding cash, making gold more attractive. Additionally, Central banks around the world, with their vast capital, have been steadily purchasing large amounts of gold, creating a strong base of demand. At the same time, rising geopolitical risks and weakening trust in the U.S. dollar have driven more investors to gold as a safe haven. For domestic factors, the biggest driver is the weaker won, which has pushed the won-dollar exchange rate higher. As a result, local gold prices went higher in KRW terms. Also, exploding retail demand has made Gold Banking accounts, KRX spot trading, and physical bars increasingly popular among investors. 

As gold prices soar in South Korea, the ‘Kimchi Premium’ – the gap between domestic and international gold prices – has widened again. As of September 15, the 1kg gold bar spot price on the KRX gold market was 166,600 won per gram, about 2.43% higher than the international price of 162, 650 won. In early September, during a peak in domestic demand, the Kimchi Premium briefly surged to 3.31%, the highest level in six months.

This premium reflects the concentration of domestic demand: when retail investors and ETFs flood the market, local prices can temporarily spike above international levels. The effect on investors is significant; those who buy gold when the premium is elevated may face losses if prices normalize. Despite this risk, the premium has been reinforced by rising domestic interest, with individual net purchases of gold totaling 2.16 trillion won in the first half of September, more than double August’s monthly total.

Experts advise that investors account for the Kimchi Premium when buying domestic gold or gold ETFs and consider alternatives that track international prices, such as KODEX Gold Active or SOL international Gold, to avoid overpaying due to local price distortions.

People see gold as a safe haven during times of uncertainty. FOMO(Fear of Missing Out) induces people to buy gold before prices rise further, and the accessibility of small bars has made them attractive to average investors and even gift buyers. A lag in imports and manufacturing, along with KOMSCO’s temporary suspension of sales earlier this year, has combined with surging demand for small bars to create shortages. The effects on consumers include longer delays and waiting lists, while wider premiums have forced small investors to pay more. Many also shifted to alternatives such as Gold Banking, ETFs, KRX spot trading.. As a result, these alternatives have become increasingly popular among investors. 

During the Jackson Hole address on August 22, Fed Chair Jerome H. Powell reiterated that U.S interest rates remain ‘restrictive,’ even as inflation has eased from its lofty post-pandemic peaks. He also warned that risks are now tilted: inflation could flare up again, while downside risks to employment are growing. For Korean investors in gold, this means heightened sensitivity to two interlinked forces: interest rate policy in the U.S and exchange-rate movements. 

Gold yields no interest, which leads to the opportunity cost of holding it increase when U.S real rates are high. If the Fed holds rates steady or delays cuts, that tends to make holding gold less attractive in USD terms, even if other global drivers such as geopolitical risk, push it up. Powell’s speech signaled that rate cuts may be approaching, which could reduce those opportunity costs and shift investor demand back toward gold.

On the exchange rate side, stronger USD tends to push gold prices up in won terms– imported gold or globally priced gold becomes more expensive for Koreans if the dollar rises. Conversely, expectations of easing U.S rates often lead to dollar weakness, which could make gold relatively cheaper in KRW and increase domestic demand. Powell’s caution that inflation risks are still present suggests that even as rate cuts are anticipated, FX markets may remain volatile.