South Korea’s New Way to Pursue Safety

While gold bullion is most often sold in bar or 1oz coin form, the Korean retail market is benefitting from gold’s latest success with a very atypical marketing strategy. It has been traditionally thought that investors prefer larger increments of bullion because they simplify calculations and have a lower transaction cost than buying the same amount of gold in smaller increments. Demand for traditional bars and coins in South Korea rose 27% year on year, but the most interesting development arises from South Korean vending machines and convenience stores. 

Korea Minting and Security Printing Corporation (KOMSCO) collaborated with CU, Korea’s largest convenience store chain, to create mini gold bars ranging from 0.5 to 1.87 grams. Each mini gold bar contains messages for birthdays and other events, adding sentimental value to their investment value. These miniature receptacles of tangible value can be found both in convenience stores and vending machines throughout Korea. Numerous other companies in Korea and the rest of Asia have begun to do similar things to capitalize on the growing economic uncertainty. The easy accessibility of these options has contributed to South Korea’s 20.2% surge in gold demand over the last year. Even though gold has already experienced a historic rise in demand, some say that the surrounding economic conditions will only continue this increase.

Rising concerns about inflation have contributed to this recent increase in appetite for gold. The extremely bite-sized nature of these tiny forms of gold allows investors to gradually shore up their portfolios against the ravages of inflation. This option is appealing to many who recognize the dangers of fiat currency yet are not ready to shell out thousands of dollars for ounces of premium gold bullion. Vending machines and other simple methods of purchasing also provide a tangible means to assuage fears. Convenience stores provide a perfect location to set off inflation alarm bells. Their wide selection of items makes it evident just how overwhelming inflation has become. This fear can be quickly satisfied by investing in a real asset with the power to protect against the threat of inflation.

While investing in Gold has traditionally been less popular with young consumers, young Koreans are making up 41.3 of purchases of these new bullion bits. They seem to enjoy the personal nature, along with the compatibility with their financial situation. Young peoples’ far smaller expendable incomes are allowed to stretch with the option to buy smaller amounts of bullion. Most young people have very little in savings and cannot save the nearly $ 2,300 or more needed to get even one ounce, the smallest standard size for traditional bullion. While they can recognize the value of gold bullion, young people often lack the self-control and financial means needed to purchase regular bullion. Young people’s lack of impulse control is nudged in a positive direction by their ability to directly see the gold in front of them rather than having to wait for it to be shipped to them.

Micro-bullion has both increased demand for gold and allowed consumers to protect themselves against the ever-possible threat of inflation. Its success in Korea raises the question of whether it would find success in America. American investors have historically chosen to buy bullion either from local coin stores or online, but options like those presented in Korea could allow more poverty-stricken or young Americans to enter the market and find a path out of their situation. A great investment would be even more democratized if Americans had access to these same options. As American inflation rises, any accessible form of Gold will make both individual citizens, and the nation as a whole better off.