Investors rush to buy gold amid interest rate jitters

Animal-shaped gold is displayed at the Korea Gold Exchange in Seoul in this file photo taken on Mar. 3. Yonhap

By Lee Min-hyung

Retail investors here are stocking up on gold, as jitters mount over the prospect of rising interest rates sparking volatility in the local stock market.

According to the nation's banking industry, KB Kookmin, Shinhan and Woori banks ― which have gold bank account products ― sold an accumulated 10,036 kilograms of gold until March 9., up 11.4 percent from the end of December last year.

Investors' interest in gold has surged during the past few weeks, with market watchers attributing this to increasing jitters over a potential rise in interest rates. Retail investors here are wary of market instability triggered by rising interest rates following a debt-driven, mass-buying spree of local stocks following more than a year of ultra-low interest rates since the COVID-19 pandemic engulfed the nation in March last year.

The benchmark KOSPI has shown signs of entering an adjustment period this month and investors have begun to seek safer assets than stocks or other risky sources of investment offering high returns. Korean stocks are particularly considered risky assets in the global capital market.

The low price is also cited as another key reason behind the recent gold investment boom. Gold is being traded at around 63,000 won ($55.65) per gram on the local market as of Tuesday. In mid-August last year, the price of gold peaked at around 79,000 won per gram, but had been declining up until now amid the low interest rate-sparked stock investment frenzy here.

“Investors eye safe assets ― such as gold and the U.S. dollar ― amid uncertainties in the financial market, but the dollar does not appear to be attractive from the perspective of retail investors, as the won-dollar exchange rate has been on a steep increase recently,” a bank industry source said. “Gold has emerged as an optimal source of investment for investors to hedge risks, as its price remains low.”

According to the three lenders, sales of gold bars here are also rising rapidly. In January, they sold 68.24 kilograms of gold bars, up 25 percent from the previous month. Sales of gold bars also topped 100 kilograms last month.