Strong demand for gold, coupled with a movement of the metal to New York, has caused a dramatic problem in the production of gold bars at the state-owned Korea Minting and Security Printing Corporation (KOMSCO).
KOMSCO mints coins and gold bars, as well as other “security items” such as banknotes, identity cards, and passports. Among its many products, the government “company” supplies gold bars to commercial banks, retail outlets, and online shopping malls in Korea.
Due to a shortage of raw gold available at nearby refineries, the Mint was forced to suspend the sale of gold bars last month, and the suspension continues.
The problem appears to be a combination of strong retail demand for physical gold in South Korea and a disruption in the gold market due to the movement of gold to the West, coupled with poor planning on the part of KOMSCO.
Earlier this year, gold and silver futures prices traded on the COMEX rose above the spot price of gold in London and other markets. Traditional analysts attribute the dynamic to the threat of tariffs pushing the price of gold (and silver) futures higher in New York, but as Chris Powell reported, there may be a more fundamental problem at play: the fact that there is much more gold on paper than physical metal.
Regardless of the reason, the gold movement has triggered record outflows of gold from London vaults and has also put pressure on availability in Asia. According to a Reuters article last month, “global bullion banks are shipping gold to the US from trading hubs that serve Asian consumers, including Dubai and Hong Kong, to capitalize on the unusually high premium that US gold futures are enjoying over spot prices.”
At the same time, there has been an increase in retail demand for gold products in South Korea.