South Korea’s mint has supply constraints

South Korea’s state-run mint is grappling with a gold bar scarcity amid strong demand for the dear metallic.

The Korea Minting and Safety Printing Company (KOMSCO), which is liable for the manufacturing and distribution of assorted safety merchandise, suspended sales of gold bars final month.

KOMSCO attributed the suspension to points with procuring provide of uncooked supplies, in response to a Google translation of the discover on its web site. The mint sometimes supplies bullion bars to Korea’s business banks, shops and on-line purchasing malls.

Vending machines within the capital of Seoul reportedly offered out of fingernail-sized gold bars, in response to local media outlets, as customers scrambled to buy the safe-haven asset.

“The sudden spike in gold demand in South Korea has led to Korean banks to quickly droop gold bar gross sales on the request of KOMSCO as there should not sufficient gold bars within the nation to fulfil native demand,” mentioned Robin Tsui, APAC gold strategist at State Avenue World Advisors.

Demand is basically being pushed by retail buyers, trade watchers advised CNBC, with many piling into the asset as a hedge in opposition to home political turmoil and issues of financial and geopolitical uncertainty sparked by U.S. President Donald Trump’s tariffs.

South Korean President Yoon Suk Yeol is at present awaiting an impeachment verdict after his short-lived declaration of martial legislation on Dec. 3.

Lawmakers additionally voted to impeach performing president Han Duck-soo late final yr, plunging the nation into renewed political turbulence. South Korea’s second performing president after Han, Choi Sang-mok, has confronted some opposition from the general public over what they see as actions to hinder efforts to apprehend Yoon.

South Korea’s home turmoil has corresponded with Trump’s return to the White Home and, together with it, the prospect of an escalating commerce conflict.

Gold’s confirmed hedge in opposition to native forex depreciation has led to increased demand amid a “speedy depreciation” of the Korean received, particularly within the final quarter of 2024, mentioned Ray Jia, a analysis head on the World Gold Council.

Bar and coin funding in South Korea surged 29% within the fourth quarter of final yr to five.9 tons, in response to knowledge supplied from World Gold Council, which coincided with an 11% depreciation of the Korean received in opposition to the U.S. greenback through the time, LSEG knowledge confirmed.

Meantime, market watchers advised CNBC that South Korea’s fairness market hadn’t been too thrilling for native buyers.

“In case you’re involved about your forex devaluing, you turn to gold. In case you’re not assured about your inventory market, you’ll change to gold,” mentioned Bernard Dahdah, valuable metals analyst at Natixis.

Whereas South Korea’s benchmark Kospi has registered a 2% climb since Dec. 3, the index noticed an exodus of 224.88 billion received ($155.9 million) amongst particular person buyers between Dec. 3 to March 5, in response to data from the stock exchange. This contrasts to a ten% acquire in spot gold costs over the identical interval.

“Gold’s superior returns over home equities has pushed extra demand for gold,” State Avenue World Advisors’ Tsui mentioned.

Sturdy U.S. demand for gold in current months has been redirecting bullion out of several countries as merchants attempt to stockpile it in preparation for Trump’s tariffs on Canada and Mexico. 

“There are regional shortages of gold, led by London however now additionally South Korea, as a result of metallic goes to the U.S. and thus there’s much less provide in these markets,” mentioned MKS Pamp’s head of technique Nicky Shiels.

A complicating issue is that merchants hoping to maneuver gold into the U.S. Comex depositories largely make deliveries via kilogram bars, that are normally obtainable solely in choose areas in Asia and Center East. 

“Korean refineries and wholesalers most likely received a cellphone name and mentioned: ‘We are going to purchase your whole inventory off you at an excellent premium, stick it on a airplane and ship it to New York,'” mentioned World Gold Council’s market strategist for Asia and Europe, John Reade. 

Moreover, a better incentive to supply the bigger kilobars sometimes accepted by Comex warehouses could also be prompting refineries to modify to producing these greater bars for cargo as an alternative, Tsui mentioned.