[Report] "Even Gold Doesn't Sell in Severe Recession"... Gold Shops Frown Despite Rising Gold Prices

Walking Around Jongno Jewelry Street
30 Years Running a Gold and Silver Shop, Only One Customer This Month
Retail Gold and Silver Shops Sigh Over Declining Customers

"They say gold prices rise during recessions, but when the economy is really bad, people don't readily buy gold."

On the afternoon of the 13th at 12 PM, Mr. A (52), the owner of a gold and silver shop in the precious metals street of Jongno-gu, Seoul, shook his head as he looked at his empty store. Mr. A has been running a gold and silver shop in Jongno for 30 years, but he lamented that this month has been one of the rare times with so few customers. This month, the only customer he had was one person who came to sell a baby’s first birthday ring weighing one don.

On the 13th, the street densely packed with jewelry stores in Jongno-gu, Seoul. It should be bustling with customers at this time, but the street is completely empty.
[Photo by Lee Ji-eun]

The situation was similar at other gold and silver shops. Except for two large shops located in prime spots along the main road, all 5 to 6 other stores were manned by the owners alone, standing in front of empty counters. As customers passed by the display counters, the owners hurriedly called out, "What are you looking for?" but soon turned their gaze to the glass doors outside the store with slumped shoulders.

Although gold demand has recently increased due to the economic downturn, causing gold prices to soar, retail gold and silver shops are sighing over the decrease in customers. Small-scale gold shops rely on sales from individual customers who purchase gold either by selling some assets or for luxury purposes, unlike large gold exchanges, so they are being hit by reduced consumer spending power caused by the recession.

As of the 15th, the gold price traded on the Korea Exchange (KRX) gold market recorded 85,409.77 KRW per gram, up 0.1% from the previous closing price. The spot gold price hit an all-time high of 87,790 KRW per gram during trading on the 16th of last month since the launch of the KRX gold market. After fluctuating slightly, it dropped to the 85,000 KRW range this month but remains higher than the same period last year when it traded around 76,000 KRW per gram. On the ground, gold was trading around 360,000 KRW per han-don (3.75g).

On the 13th, the jewelry street in Jongno-gu, Seoul, is showing a quiet scene.
[Photo by Lee Ji-eun]

In reality, the transaction volume felt by retail gold shops is not large. Mr. B (41), an employee at the Jongno gold exchange, said, "During COVID-19, since customers couldn’t travel abroad and their spending decreased, their purchasing power seemed to increase, so many bought or sold gold. Recently, only a few customers who bought gold long ago to gain capital gains and some who come to sell baby’s first birthday rings visit the store."

Customers who come to inquire about gold prices but leave without selling were also noticeable. Those who bought gold at low prices turn away, expecting prices to rise further, while buyers hesitate to purchase gold at the sharply increased prices.

Mr. C (57), who runs a precious metals store, said, "Customers who came to sell gold after seeing news that the price might rise to 400,000 KRW per han-don check the prices and then disappear. On the other hand, customers who come to buy gold complain that the price is too high." He added, "Gold is popular during recessions, but that only happens when wallets can support it. Since people don’t have money and gold is too expensive, even if they expect gold prices to rise, there are no customers willing to buy," he said with a bitter smile.

In fact, according to the Korea Exchange’s gold trading status last month, despite gold prices being higher in January this year compared to the same month last year, individual selling volume (486,820g) and buying volume (424,830g) decreased by 16% and 20%, respectively. As of the 31st of last month, the gold price per gram was 87,834 KRW, about 12,000 KRW higher than the same day last year (75,781 KRW).

Since gold trading is classified as a kind of investment market, the trading trends may differ from those in retail settings, according to industry analysis. A Korea Exchange official explained, "Gold trading has a strong investment market character, so trading does not skew heavily to one side depending on the price," adding, "At this point, individual buyers may hesitate to purchase gold because they consider the price too high." He further noted, "Since gold is a safe asset, many people hold it long-term, so unlike other assets, there is less tendency to sell immediately when prices rise."