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Investors flock to gold, silver amid growing market uncertainties

12 August 2019


The sales of gold and silver bars have been on a continued increase over the past few months as investors favor safe assets amid escalating uncertainties fueled by the U.S.-China trade dispute and Japan's export restriction measures.According to Korea Exchange (KRX), one gram of gold was sold for 59,550 won ($49.13) Aug. 9, the highest since March 2014 when the gold bar trading market opened in Korea. This is about a 28 percent jump from 46,240 won in Jan. 2.The recent spike, which has been setting a new record every day since Aug. 2, is in line with the steady price increase over the past few months.


Data from KB Kookmin, Woori, KEB Hana and NongHyup Banks showed they sold a combined 17.1 billion won of gold bars, a near five-fold increase from two months earlier in March when the figure was 3.4 billion won.


They sold 8.9 billion won in June and 7.3 billion won in July, a slight decrease from the peak, but they are still much higher compared to the figure in March.Also attracting investors' attention is silver, whose price jumped over 17 percent over the past month.KRX data showed one gram of silver was sold for 2,740 won Aug. 9, a 17.6 percent increase from 2,330 won July 1.The price jump has led many commercial banks to reconsider establishing sales channels to sell the formerly unpopular asset.NongHyup Bank said it will begin selling silver bars at the end of August.The Japanese yen, considered one of the safe assets alongside U.S. dollar, has strengthened against Korean won over the past month as well.The Japanese currency soared to 1,144.96 won per 100 yen Aug. 9, up 76.82 won from 1,068.14 won per 100 yen July 1.Meanwhile, the lingering trade uncertainties have led to stronger speculative forces in the foreign exchange market seeking short-term gains by selling off dollars against Korean won which plunged to a near three-year low within a one-week period last week.


The Korean won plunged to 1,215.30 won per dollar Aug. 5, a 32.2 won drop from 1,183.1 won per dollar July 31. The price was the lowest in three years and five months since March 2016 when it hit 1,227 won per dollar.According to the five leading commercial banks, the balance of U.S. dollar-denominated deposits between July 31 and Aug. 2 dropped by over $1.3 billion, but increased by over $824 million between Aug. 2 and 8.


The notable drop and the subsequent jump in the balance amount indicates many investors sold off dollars amid the sharp won drop, followed by another buying-spree of dollars in expectation of a further sudden plunge in the Korean currency in the future.The short-term currency difference gain-seeking came amid a growing "risk-averse" investor sentiment favoring dollars over volatile stock investments.Data from the banks showed the balance of dollar-denominated deposits are on a continued rise ― from $34 million in March to over $37 million as of Aug. 8.