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As international gold prices extend an unprecedented rally past $5,000 per ounce, balances in gold banking accounts at South Korean commercial banks are rising sharply. Expectations that gold prices will continue to climb have sustained investor enthusiasm, while banks are benefiting from increased non-interest income driven by growing investment demand./IT ChosunAccording to the financial industry on Jan. 29, gold banking balances at KB Kookmin Bank, Shinhan Bank, and Woori Bank totaled 2.2333 trillion won as of Jan. 27. The figure has more than doubled in just 10 months since surpassing 1 trillion won in March last year. Compared with January 2024, when balances stood at 835.3 billion won, the amount has surged 167% year on year, and rose 15.6% month on month from 1.932 trillion won in December.Rising gold prices have also driven strong returns for gold banking investors. International gold prices have climbed about 80% compared with January last year. Even after accounting for the 15.4% tax on capital gains, investors who purchased gold through gold banking at that time are estimated to have earned returns exceeding 70%.Gold banking has gained popularity largely due to its accessibility. While KRX physical gold and gold bars require purchases in fixed minimum quantities, gold banking allows investments in increments as small as 0.01 grams, making it more accessible to retail investors. Another advantage is the ability to invest in gold-linked assets through bank accounts without the burden of storing physical gold. Recent supply disruptions in gold and silver bars have also driven funds into gold and silver banking accounts as alternative investment vehicles.Outlooks for gold prices remain bullish, suggesting further growth in gold banking demand. Expectations of a weaker U.S. dollar following remarks by U.S. President Donald Trump, ongoing geopolitical risks, and anticipation of a more dovish policy stance by the Federal Reserve have all contributed to upward pressure on gold prices.As of the latest trading session, international gold prices have exceeded $5,200 per ounce, with forecasts emerging that prices could reach $6,000 per ounce within the year. Global investment banks including Société Générale, Bank of America (BoA), and Deutsche Bank have cited $6,000 as a realistic year-end target.Silver prices have also surged alongside gold, fueling interest in silver banking products. Silver banking balances currently stand at approximately 428.3 billion won, drawing heightened investor attention after silver prices jumped more than 200% over the past year. Compared with 231 billion won at the end of December, balances rose 77.7% in just one month. Silver prices climbed from $30 per ounce in January last year to $105 as of Jan. 27. Silver banking accounts are currently offered only by Shinhan Bank.The simultaneous rise in gold and silver prices has helped banks diversify their revenue streams. Unlike deposits, gold banking products do not pay guaranteed interest, reducing funding costs, while generating non-interest income through transaction fees and spreads. Banks also expect such products to help retain high-net-worth clients seeking wealth management services.However, investors are advised to exercise caution. Banks classify gold banking as a high-risk product, as gold prices—despite being viewed as a safe haven—can experience sharp volatility during market corrections. Historically, gold prices have fallen more than 30% in short periods. In addition, gold banking carries higher fees than KRX physical gold trading, and capital gains are subject to a 15.4% tax, similar to gold ETFs. Gains may also be subject to comprehensive financial income taxation.A banking industry official said, “Demand for gold and silver is likely to persist for the time being, but given the rapid pace of price increases, investors should carefully consider volatility and cost structures before investing.”onej@chosunbiz.com
