Money moves to gold, silver as 'Sam-Nix' stocks stall

Gold, silver banking balances up 97 billion won in two weeks

Gold prices rebound 12% in a month, drawing buyers back

Silver outpaces gold — silver banking balances up 9%

'$4,600 breakout the key inflection point; oil a wild card'

Gold and silver bars stacked in a bank vault.
Gold and silver bars stacked in a bank vault.

As South Korea's stock market freezes at its lowest trading volume and value of the year, investors are shifting money into safe-haven assets such as gold and silver. With Samsung Electronics and SK Hynix — the two heavyweights that had driven the market — struggling to find any footing for a rebound, funds are flowing into gold, which has risen more than 10% over the past month, as well as into silver and bonds. This month alone, close to 100 billion won ($70.9 million) has poured into gold and silver banking accounts at major banks.

The combined gold banking balance at KB Kookmin, Shinhan Bank and Woori Bank stood at 1.7937 trillion won as of Aug. 14, up 77.8 billion won from late July, when the Kospi had plunged more than 20% in a single month and the balance sat at 1.7159 trillion won. It marks the first month-on-month increase in gold banking balances since January, ending a seven-month slide. Gold banking accounts allow customers to buy and sell gold in increments of 0.01 grams at prevailing market prices.

International gold prices have jumped more than 10% over the past month, quickly reviving investor demand. Gold futures on the New York Commodities Exchange (Comex) closed Wednesday at $4,386.40 per ounce, down 0.77% from the previous session. Futures had fallen as low as $3,992.10 on July 16 before climbing to $4,473.70 on Monday — a gain of roughly 12% in about a month.

Gold had surged sharply toward the end of last year as global geopolitical uncertainty intensified, briefly touching $5,500 per ounce in January. Prices then tumbled below $4,000 in the wake of Middle East tensions, but have since turned higher as concerns about further Federal Reserve rate hikes have eased somewhat. The Bank of Korea's decision to resume gold purchases for the first time since 2013 has also helped revive investor sentiment.

Silver is also drawing fresh money. Shinhan Bank, the only major commercial bank offering silver banking accounts, saw its silver banking balance rise 19.5 billion won — or 9% — from 217.4 billion won at the end of last month to 236.9 billion won as of Aug. 14. That growth rate is roughly double the 4.5% increase recorded in gold banking over the same period. In total, more than 97 billion won flowed into gold and silver banking accounts in roughly two weeks. Silver banking balances had fallen for two consecutive months — down 59.6 billion won in June and 17.1 billion won in July — before rebounding for the first time in three months.

Physical gold sales are also picking up. The five major banks — KB Kookmin, Shinhan, Hana, Woori and NongHyup — sold about 15.6 billion won worth of gold bars in the first two weeks of this month, averaging 1.73 billion won per business day, roughly 20% more than the daily average of 1.45 billion won in July. Gold and silver ETFs are attracting inflows as well. This month, the net assets of ACE KRX Gold Spot grew by 287.7 billion won, while Kodex Silver Futures (H) and Tiger KRX Gold Spot rose by 93.9 billion won and 83.3 billion won, respectively.

Analysts broadly expect the recent gold price rebound to continue for now, but flag international oil prices as a key variable. Hong Seong-gi, a researcher at LS Securities, said that if oil prices spike again due to Middle East instability, inflation fears could resurface and put rate hikes back on the Federal Reserve's agenda. "Whether gold breaks above $4,600 per ounce will be a critical inflection point on the way to a new high," he said.

Meanwhile, safe-haven flows are also spreading into the bond market. According to Koscom Check data, individual investors' net purchases of over-the-counter bonds reached 1.5083 trillion won from the start of the month through Tuesday. After hitting a year-to-date low of 1.7337 trillion won in May, monthly buying has recently been running at around 3 trillion won. Breaking down by type, individuals were net buyers of 341 billion won in government bonds and 330.7 billion won in bank bonds over the past two weeks.


forest@heraldcorp.com