"Should I Trust My Child's First Birthday Gold Ring?"... How Korea's First Gold Trust Product Pays Interest [News Seolcham]

A New Trust Product Lets You Earn Interest by Depositing Gold
Customer's Gold Is Appraised and Lent to a Partner Company
Interest Is Paid Through This Lending Structure

Editor's Note'Seolcham' is a newly coined term meaning "refer to the explanation for more details." In [News Seolcham], we aim to highlight and explain in detail the parts of the news that require fact-checking or further clarification.

Hana Bank's Hana Gold Trust, launched on August 11, is the first trust product in Korea designed to safely store physical gold while generating operational profits.

What is a Trust Product?

A trust product refers to a financial product in which a financial institution such as a bank manages assets received from customers for a certain period and returns the profits generated from its operation. Broadly, there are products that preserve the principal and pay dividends at a fixed interest rate, and performance-based products that pay dividends according to operational results. Hana Gold Trust is a product that returns both the physical gold at maturity and a fixed annual operational profit of 1.5%.

Stone Ring

To enroll in Hana Gold Trust, as long as the physical gold is 24K pure gold (with a minimum enrollment weight of 30g), there are no restrictions on the form-it can be anything from gold bars to rings or necklaces. Customers deposit their gold in the bank's vault for a set period and, at maturity, receive the principal and annual interest of 1.5% (based on the appraised value, before tax, after deducting the trust fee). The principal is returned as a gold bar of the same weight as the deposited gold, and in the case of minor weights that cannot be made into a gold bar, the equivalent is paid in cash. Customers can also choose to receive the interest either in cash or in gold of equivalent value.

An employee is organizing gold bars at the Korea Gold Exchange Jongno Main Branch in Jongno-gu, Seoul. Photo by Kang Jinhyung aymsdream@

Until now, gold-related financial products were limited to indirect investments in gold through banks, such as gold passbooks (Gold Banking), exchange-traded notes (ETNs), and exchange-traded funds (ETFs) that track international spot and futures prices of gold. In addition, it was difficult to convert physical gold into cash except through direct trading. A Hana Bank Trust Department official emphasized, "Hana Gold Trust is the first product in Korea where the bank manages customers' physical gold and returns the interest."

Hana Bank, through its partner Korea Gold Exchange Digital Asset, measures the exact purity and weight of the physical gold deposited by trust subscribers. After appraisal, the gold is processed and lent to the bank's affiliated business partners. A bank official explained, "The gold is lent to affiliated partners under a consumption loan structure," and "At maturity, the bank receives the gold and interest back from the partner and then pays it to the customer."

The affiliated business partners can manage and dispose of the gold borrowed from the bank in various ways. Since the bank receives the physical gold and the contracted fixed interest from the partner on the agreed date, it is not affected by how much profit or loss the partner makes from operating the gold. This is why customers enrolled in Hana Gold Trust can receive both the principal and fixed interest at maturity.

From the bank's perspective, selling Hana Gold Trust allows it to collect a trust fee rate (0.3-0.5%), while consumers benefit from being able to safely deposit physical gold-which can be cumbersome to sell-after professional appraisal and certification, and earn profits as well. However, consumers should note that they cannot reflect changes in the gold price during the product's term until maturity.