According to the Korea Exchange, as of the 28th of last month, the per-gram closing price of 1kg of 99.99% gold was KRW 139,030—a 14.98% decline over two weeks compared to KRW 163,530 on the 14th.
On the 14th, the divergence between domestic gold prices and international prices reached an intraday high of 24% and a closing high of 20.13%, but it quickly contracted thereafter.
Safe assets like gold generally appreciate during periods of war and financial market uncertainty, but they face downward pressure during periods of economic normalization.
Opinion
The rapid normalization of the excessive domestic gold premium has led to increased volatility. Although global gold demand remains robust, a potential easing of geopolitical risks may trigger further price adjustments. While gold can serve as a long-term hedge as a safe asset, its short-term high volatility suggests that a strategic portfolio allocation of 5–10% is advisable.
Core Sell Point
As the premium on domestic gold prices normalizes, there is a risk of further price declines. From a long-term investment perspective, employing a dollar-cost averaging strategy is recommended.
Domestic physical gold prices, which had been marked by a “Kimchi Premium,” have rapidly normalized, leading to a sharp decline in gold prices. According to the Korea Exchange (KRX), as of the 28th of last month, the per-gram closing price for 1kg of 99.99% gold in the KRX gold market dropped 14.98% over two weeks—from KRW 163,530 recorded on the 14th to KRW 139,030. In contrast, international gold prices fell only 0.95% during the same period, suggesting that the steep drop in domestic gold prices was a result of an excessive premium adjustment.
On the 14th, the divergence between domestic gold prices and international prices reached an intraday peak of 24% and a closing divergence of 20.13%, but these gaps quickly shrank as investors shifted toward gold futures and international gold spot markets. Experts believe that while global central banks are likely to continue increasing their gold purchases and safe asset demand will persist amid ongoing trade disputes, the process of normalizing the excessive domestic premium may lead to increased volatility. For investors wishing to gain exposure to gold at international prices domestically, alternatives such as gold banking products (from banks like KB, Woori, Shinhan) and S&P Gold ETFs are available, though these options come with additional fees and tax burdens.
Gold is widely regarded as a safe asset; however, its price is prone to decline when wars or market uncertainties subside. While gold tends to rise during periods of heightened geopolitical and financial market uncertainty, it faces downward pressure during phases of economic normalization. From a strategic asset allocation perspective, maintaining a 5–10% allocation of the overall portfolio in gold may be effective for risk hedging. Moreover, if gold prices experience further adjustments, adopting a dollar-cost averaging strategy for long-term investment is advisable.
