Investors Rush to 'Bargain Buying' Amid Dollar Weakness
Gold-Related Products Gain Popularity Amid Economic Uncertainty
Dollar deposits at the five major domestic banks have increased by nearly 4 trillion won just this month. This surge is attributed to a sharp drop in the value of the dollar triggered by the tariff war initiated by the Trump administration in the United States, which many saw as a 'bargain buying' opportunity, leading to a significant increase in dollar purchases.
According to the financial sector on April 21, the dollar deposit balance at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) stood at $60.744 billion as of April 17. This represents a 4.7% increase compared to $58.02 billion at the end of the previous month.
The dollar deposit balance at the five major banks had dropped to $56.35 billion as of April 10, but then rebounded by more than $4 billion in just five trading days through April 17. Dollar deposits have shown an 'inverse' relationship with the won/dollar exchange rate: when the exchange rate rises, deposit balances noticeably decrease, and when the exchange rate falls, balances increase again.
The exchange rate reached 1,484.1 won per dollar at the close of weekly trading on April 9, when U.S. reciprocal tariffs took effect, marking the highest level in 16 years since March 12, 2009 (1,496.5 won) during the financial crisis. It then fell to 1,418.9 won on April 17, amid heightened concerns over U.S. inflation and economic recession, hitting its lowest level since December 5 of last year (1,415.1 won). Experts noted, "A so-called 'bargain sale' is underway as prices have dropped significantly," and added, "Confusion caused by reciprocal tariffs is expected to persist for some time, so further declines in the exchange rate due to dollar weakness are also possible."
As economic uncertainty grows and demand for safe-haven assets rises, there is also a trend of pouring money into gold-related products. As of April 17, the gold banking balance at KB Kookmin, Shinhan, and Woori Bank stood at 1.0649 trillion won. Hana Bank and NH Nonghyup Bank do not offer gold banking services. Gold banking is a product that allows customers to buy and sell gold in units as small as 0.01 grams through bank accounts that allow free deposits and withdrawals. The combined balance at the three banks surpassed 1 trillion won at the end of last month and has continued to hit record highs each day since. The ability to freely buy and sell gold regardless of subscription period or amount, without actually holding physical gold, has contributed to its popularity.
Gold bars are also in high demand. The five major banks sold 20.78 billion won worth of gold bars from the beginning of this month through April 17. This is more than double the 9.94 billion won sold in the entire month of April last year. Monthly gold bar sales increased steadily, reaching 15.092 billion won in November 2024, 18.77 billion won in December, and 27.031 billion won in January 2025, before surging to 88.293 billion won in February. Afterwards, an unprecedented shortage occurred as KB Kookmin Bank and Woori Bank completely suspended gold bar sales due to supply instability, resulting in sales dropping to 38.64 billion won in March.
The rise in gold prices is underpinned by uncertainty surrounding the global economy. Increased economic uncertainty has led to higher demand for safe-haven assets. As financial market turmoil intensifies, there are forecasts that gold prices will continue to trend upward for the time being, suggesting that investment in gold-related products is likely to continue. Some analysts even predict that gold prices could rise above $3,400 to $3,500 in the future.
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