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Amid Israel-Gaza war, soaring gold price makes South Korea’s traditional gold ring gift for babies unfeasible

arifnsn November 6, 2023

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In South Korea, a pure gold ring has long been a traditional gift on the occasion of a baby’s first birthday, to bless his or her health and security.

However, the soaring price of gold is now prompting South Koreans to look for economic alternatives.

A baby ring of 24-karat, the purest form of gold used in jewellery, now costs more than 400,000 won (US$300), more or less, given that an average baby ring weighs 3.75 grams.

This is a 15 per cent hike in just the past couple of months. The gold ring price, of course, has followed the upward movement of the price of gold internationally.

Gold prices send Thai, Indian buyers into frenzy as war stokes inflation

Gold rose steeply following the outbreak of the Israel-Gaza war in early October. The precious metal’s bullish price move reached a peak, briefly surpassing US$2,005 per ounce at the end of last month at the New York Mercantile Exchange. It is the first time the global gold price exceeded US$2,000 since May. The price is hovering at around US$1,990 per ounce, but remains at the highest since last May.

South Korea’s gold price also rose steeply. According to data from the KRX gold market, the state-run gold trading platform, one gram of gold reached an all-time high of 86,820 won (US$67) on October 30. It is the highest price ever traded at the KRX gold market, since its founding in 2014. The price went down to 83,010 won, as of this week.

Similarly, the price of 3.75 grams of 24-karat gold – a widely used unit of weight in trading precious metals in Asia, as well as the basic unit of the baby gold ring – soared to a record-high price of 374,000 won on October 28 at the Korea Gold Exchange, the country’s largest private gold supplier, more than twice the price in 2013.

Market watchers say the Israel-Gaza war is the main reason for the surging price. Buyers have flocked to gold as a safe haven asset as concerns grow over the “Fifth Middle East War”, amid an intensifying conflict in the region.

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As a result, the monthly average price of gold went up by 8.19 per cent in October alone, the highest growth since March’s 8.86 per cent, when the sense of anxiety also spiked over the sudden collapse of Silicon Valley Bank. Gold-related ETFs also posted the highest rate of returns among domestic ETFs during the past month.

“The triple layers of threat of a high foreign exchange rate, high interest rates and high inflation, on top of an economic slowdown, has led to an increase in sales of gold for the sake of profit-taking,” Song Jong-gil, CEO of the Korea Gold Exchange, said.

“The price of gold is expected to maintain its upward trajectory for the foreseeable future amid a preference for safe-haven assets, considering the possibility of an escalation in the Israel-Gaza war and the prolongation of the Ukraine war,” he said.

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