A peculiar phenomenon has emerged in Korea’s gold market, where domestic gold prices are nearly 20% higher than international prices. This ‘Kimchi Premium,’ previously seen in the cryptocurrency market, has now extended to gold, driven by investor anxiety and market distortions.
🔥 3 Key Points
1️⃣ The price of gold in Korea’s KRX market is 19.47% higher than the London Bullion Market Association (LBMA) price, marking the highest gap since the market's establishment in 2014.
2️⃣ Unlike cryptocurrency, gold is a globally traded asset with minimal price discrepancies, making this abnormal price gap unusual.
3️⃣ The surge in gold prices is linked to investor fears of further price hikes and the stagnation of Korea’s stock market, leading to speculative buying.
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‘Kimchi Premium’ Hits the Gold Market: Why Is Gold in Korea 20% More Expensive?
1. KRX Gold Market Shows Record Price Discrepancy
On February 13, gold prices in Korea’s KRX market were nearly 20% higher than global benchmarks, specifically the LBMA price. This is an unprecedented level since the KRX gold market was established in 2014, with the usual daily price gap averaging just 0.46%. The sharp divergence raises concerns about potential market inefficiencies and speculative behavior.
2. Why Does Gold Have a ‘Kimchi Premium’?
The ‘Kimchi Premium’ is commonly observed in Korea’s cryptocurrency market due to government regulations restricting capital flow and prohibiting short selling. However, gold is a freely traded global asset, making such a large price gap unusual. Experts attribute this premium to panic buying, as investors fear missing out on further price increases. Additionally, Korea’s stock market has been stagnating, with the KOSPI index hovering around 2,500 for years. This has prompted investors to move their funds into gold, further inflating prices.
3. Is This Gold Price Surge Sustainable?
While betting on rising gold prices is an individual investment choice, the 20% premium presents a significant risk. Historically, speculative frenzies have rarely ended well. Financial analysts warn that the current ‘Gold Kimchi Premium’ is excessive, and investors should exercise caution. If global gold prices stabilize or decline, those who bought at inflated prices may face losses.
🔍 In Summary
The Korean gold market is experiencing an unprecedented price discrepancy, with domestic prices nearly 20% higher than international benchmarks. The surge is driven by investor anxiety, speculative buying, and a weak stock market. However, financial experts caution that such a high premium is unsustainable and could pose significant risks to investors.
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