New South Korea Gold Exchange More Proof Of Strong Asian Demand For The Yellow Metal

By Neils Christensen of Kitco News
Tuesday July 23, 2013 12:35 PM (Kitco News) -With so much demand for  

physical gold in Asia, analysts are not surprised that South Korea is 

trying to get in on the action.

 On Monday, South Korea’s Financial Services Commission said 

that in the first quarter of 2014, spot gold will be traded on the 

country’s markets like listed stocks.

 According to media reports, the commission said the gold 

exchange is being created to combat “underground gold 

transactions.” The commission added that, people have been 

buying and selling black-market gold as a way to avoid the 

country’s value added taxes.

 Howard Wen, analyst at HBSC said, he doesn’t know how big the 

exchange will be, but it does continue to add to the argument that 

Asian consumers want physical gold.

 Wen added that although the South Korean market is relatively 

small, easier access to gold is definitely positive for the market.

George Gero, vice president and precious-metals strategist with 

RBC Capital Markets Global Futures, said with so much trading 

activity in Hong Kong and Tokyo and new gold vaults in Singapore, 

it is not surprising that South Korea wants to create their own 

market.

“There is tremendous interest in Asia for trading and buying gold,” 

he said.

 Gero added, as another example of strong dedmand in Asia, a new 

overnight contract introduced on the Shanghai Futures Exchange 

has seen surprisingly strong volume since it started trading on July 

5.  The creation of new exchanges means there will be new 

arbitrage opportunities and more liquidity, which is something the 

Asian market could use, he added.

 Colin Cieszynsk, senior market analyst at CMC Markets Canada, 

agreed that increased liquidity will help the market. He added it 

could also help to lower some of the volatility sometimes seen 

during the Asian trading session.

 “Gold is such a huge market that it could support more exchanges 

even if it is only localized trading,” he said. “There is no question 

that liquidity is a good thing.”

Although Asia appears to be setting its self up as physical gold hub, 

analysts are not sure that these countries will be able to dominate 

the market. Wen said he would expect investor demand to 

continue to dominate price trends for the yellow metal.

“It’s true that whoever holds the gold has control, but the bulk of 

the paper trading still happens on Comex,” said Wen.

Gero added that the gold market is too big to be controlled by one 

country or even one region.

“I don’t think any one area can control prices for very long,” he said.