[Daily Gold #11] Why Is There a ‘Kimchi Premium’ in Gold? Understanding the Price Disparity in South Korea’s Gold Market

-

Discover why gold prices in South Korea often exceed global rates. This article explores the so-called “Kimchi Premium” in the Korean gold market — its causes, investment risks, and what it means for gold investors in 2025.


Stacks of gold-colored Bitcoin coins in front of the South Korean flag – a symbolic image representing Korea’s unique gold pricing phenomenon known as the 'Kimchi Premium'


When people talk about the ‘Kimchi Premium,’ they usually refer to cryptocurrency. But what if we told you that a similar phenomenon is quietly unfolding in the gold market? South Korean investors are paying significantly more for gold compared to global spot prices — and it’s not just a fluke.

In this 11th edition of the Daily Gold series, we dive deep into how the so-called ‘Kimchi Premium’ extends beyond Bitcoin and into bullion. What causes this price gap? Should investors be concerned? And how does it impact your gold investment strategy?


📃 Table of Contents

1. What Is the Kimchi Premium?

Originally coined during the 2017 cryptocurrency boom, the term ‘Kimchi Premium’ describes the phenomenon where cryptocurrencies like Bitcoin are traded at higher prices on Korean exchanges compared to international markets.

The premium results from a combination of:

  • Strict capital controls
  • High domestic demand
  • Limited arbitrage opportunities
  • Market psychology and speculation

But over time, this concept has evolved and now appears in other asset classes — including gold.


2. Why Gold Is More Expensive in Korea

When comparing Korean gold prices to international spot prices, there’s often a noticeable markup. This can be attributed to multiple factors:

  • Import Taxes and VAT: Korea imposes a 10% Value-Added Tax on gold purchases.
  • Premiums for Domestic Refining: Korean gold bars often come with additional costs due to processing and branding.
  • Limited Supply: The KRX Gold Market and local dealers have supply constraints that drive up prices.
  • Investor Demand: Heightened economic anxiety and demand for safe-haven assets boost domestic gold prices.

The result? A persistent and sometimes widening price gap between Korean retail gold prices and the global gold spot rate.


3. Can You Profit from the Price Gap?

While arbitrage might seem like an attractive option, capital controls and import/export regulations make it nearly impossible for individuals to take advantage of the price difference.

Some institutions may engage in complex international arbitrage, but for the average investor, it’s not practical. Instead, recognizing the existence of the premium can help guide smarter entry and exit timing within the local market.



4. Investment Strategies in a Premium Market

If you’re investing in gold in Korea, here are a few tips:

  • Understand the KRX Gold Market: It offers a lower-fee, regulated platform for purchasing gold.
  • Compare Global vs Local Prices: Keep track of both to understand the premium before buying.
  • Don’t Overtrade: In a premium market, transaction fees and taxes can quickly erode gains.
  • Hold for the Long-Term: If you believe in gold’s long-term value, short-term premiums may matter less.

5. FAQ: Gold Premium in Korea

Q1. Is the gold premium in Korea always present?
Not always, but it tends to appear during periods of economic instability or rising demand.

Q2. Should I buy gold overseas instead?
That may be cheaper, but logistical, legal, and security concerns make it difficult.

Q3. Will the premium ever disappear?
Unlikely in the short term, as Korea’s tax structure and capital controls are entrenched.


6. Conclusion: Premium or Pitfall?

The ‘Kimchi Premium’ in gold is a real, measurable phenomenon that reflects both structural economic policies and investor sentiment in South Korea. While it might seem frustrating, understanding it is key to making informed investment choices.

Whether you see it as a barrier or a benchmark, the Korean gold premium teaches us that value is not just about price — it's about context.



📘 Previous Post:
[Daily Gold #10] Why Is Gold Surging? Exploring the Real Value of Gold in an Era of Uncertainty

📘 Next Post:
[Daily Gold #12] How War Shapes Gold Prices: The Middle East Tension and the Rush to Safe Assets

Comments

Post a Comment

Popular posts from this blog

[Daily Gold #08] Gold ETF vs Physical Gold – Which Investment Suits You Best?

-
Image
Explore the key differences between gold ETFs and physical gold. This guide helps you choose the right investment based on structure, fees, taxes, liquidity, and your financial goals. Gold has fascinated civilizations for centuries. In today’s fast-paced, tech-driven markets, it remains a powerful symbol of stability and value. But if you’re looking to invest in gold, you might find yourself caught between two options: physical gold or gold ETFs. Both offer access to the same underlying asset, but they differ in structure, cost, convenience, and suitability depending on your goals. Let’s break it down.  Table of Contents 1. What Is a Gold ETF? 2. Structural Differences Between Physical Gold and ETFs 3. Fees, Taxes, and Liquidity 4. Which Option Fits Different Investors? 5. Can You Combine Both? 6. FAQ – Frequently Asked Questions 7. Conclusion – The Right Choice Depends on You 1. What Is a Gold ETF? Gold ETFs (Exchange-Traded Funds) are financial produ...
Read more

[Daily Gold #06] How to Safely Buy Physical Gold : A Comprehensive Beginner’s Guide to Buying, Verifying, and Storing Real Gold

-
Image
A complete beginner’s guide to buying physical gold safely. Learn how to verify authenticity, choose the right seller, and store your gold securely. Planning to buy physical gold? Learn how to avoid counterfeits, choose certified dealers, understand tax implications, and store your investment securely. This all-in-one guide provides everything beginners need for a safe and informed purchase. Table of Contents Is All "99.99% Pure" Gold the Same? Where Is the Safest Place to Buy Gold? How to Identify Fake Gold Bars Taxes to Know When Buying Gold Best Practices for Storing Physical Gold FAQ – Frequently Asked Questions Final Thoughts 1. Is All "99.99% Pure" Gold the Same? Gold marked as 24K (99.99% purity) is considered the standard for investment-grade bullion. However, not all gold labeled this way is genuinely pure. Always look for hallmarks from certified refineries such as KOMSCO (Korea Minting and Se...
Read more

South Korea’s 2025 Presidential Election – Explained for the World

-
Image
 South Korea's 2025 presidential election—triggered by an impeachment—is a turning point for Asia's democracy. Explore the key candidates, overseas voting, debates, and why the world is watching. Introduction: Why the World Should Care When you think of pivotal elections in 2025, you might imagine the U.S. or the EU. But this summer, all eyes should be on South Korea. On June 3, 2025, the country will hold its 21st presidential election—not a regular one, but a high-stakes vote brought on by the impeachment and resignation of former President Yoon Suk-yeol. Nicknamed the “Rose Election” (because it blooms in June), this vote isn’t just about choosing a new leader. It’s about trust, generational change, and what democracy looks like under pressure in one of Asia’s most technologically advanced nations. Table of Contents 1. What Makes This Election So Unusual? 2. Who’s Running? The Main Candidates 3. Korean Voters Get Election Booklets by Mail 4. Election Calenda...
Read more