Stretching 'Gold', Will KRX Gold Trading Volume Set a New Record This Year Again?

[Asia Economy Reporter Lee Seon-ae] As the era of a strong dollar and high interest rates unfolds, gold, which had been subdued, is stretching out again, leading to an increasing trend in trading volume. With positive outlooks pouring in for gold, attention is focused on the annual gold trading volume record in the KRX Gold Market this year.

According to the Korea Exchange on the 30th, the monthly trading volume in the KRX Gold Market has been on the rise again since October. It continuously increased from January with 2016.3kg, February 2577.5kg, March 4139.5kg, then started to decline from April with 2121.6kg, May 1462.5kg, June 1204.0kg, and July 1098.9kg. In August, it fell below 1000kg, dropping to 764.4kg. However, in September it rose to 1170.2kg and in October to 1366.3kg, showing an increase in monthly trading volume again. The total trading volume in October increased by 16.8% compared to the previous month.

Average daily trading volume is also showing an upward trend. The average daily trading volume in October was 71.9kg, a 22.9% increase from 58.5kg in the previous month. The trading value amounted to 104.99 billion KRW, up 19.2% from the previous month, and the average daily trading value was 5.53 billion KRW, a 25.5% increase compared to the previous month.

The market expects trading volume to continue increasing in November and December as well. Thanks to the slowdown in the pace of interest rate hikes, the strong dollar has eased, causing gold prices to rise again and emerge as an attractive investment destination. With an economic recession inevitable next year, the perception that gold is the safest asset that shines most during recessions is clear, which is expected to boost its popularity. Historically, gold's returns have always been higher than stocks during recession periods.

However, since the interest rate hike cycle is expected to continue until the first half of next year and inflation uncertainties remain, there will likely be limits to gold price increases. Nevertheless, given the globally high demand for gold purchases, it is judged that a floor has been established, and from a long-term perspective, an upward trend is expected. Therefore, it is recommended to approach gold as a concept of diversified and safe investment.

A Korea Exchange KRX Gold Market official stated, "Concerns about Russia's invasion of Ukraine and ongoing inflation analyses have significantly strengthened the preference for safe-haven gold, leading to increased trading volume," and added, "The KRX Gold Market trading volume is expected to grow this year as well."

Meanwhile, the total trading volume in the KRX Gold Market increased from 10,713.3kg in 2019 to 26,201.0kg in 2020 and 28,295.8kg in 2021. The average daily trading volume was only 43.6kg in 2019 but jumped to 105.6kg in 2020 and further increased to 114.1kg in 2021.

The reason the KRX Gold Market is attracting attention is that it is regarded as the most rational market for both investors expecting investment returns and those wishing to hold physical gold. Methods of investing in gold include trading in the KRX Gold Market, physical gold trading (gold shops), Gold Banking, and bank gold trusts. Among these, investing in gold through the KRX Gold Market is highly praised among investors as the most affordable way to buy gold. By ordering online, trading can be done with a low commission of around 0.3%. This is the cheapest compared to other investment methods such as Gold Banking, which charges about 1%. Tax exemption benefits are also available. Since capital gains from trading are tax-exempt, it is not subject to comprehensive financial income taxation. A KRX Gold Market official emphasized, "Tax exemption is a benefit not seen in any other investment method." Capital gains from Gold Banking and gold ETFs are taxed as dividend income, with 15.4% withholding tax on gains.