Jittery Investors Park Money in Safe Havens
28 May, 2019
Investors are increasingly turning to safe-haven assets as the intensifying trade war between the U.S. and China is rattling stock markets around the world.
Jittery investors are pulling their cash out of stock markets and parking it in gold, U.S. dollars and bonds.
Demand for gold bars is soaring because they are not easily swayed by market volatility and can be readily exchanged for cash. Sales of gold bars at Korea's four major banks -- KB Kookmin, Woori, KEB Hana and NH Nonghyup -- reached W10.74 billion in May (US$1=W1,186).
In January, they stood at W2.46 billion but had risen to W8.2 billion in April. Some banks have even stopped selling small gold bars of less than 100 g after supplies ran out.
The won has plummeted against the dollar, causing gold prices to soar. The price reached W49,270 per gram at the Korea Exchange last Friday, rising 10.4 percent in just six months. On May 16, it hit the highest in two years and 10 months at W49,700.
Investors are also snapping up dollars for fear that Korea's current account surplus will shrink as exports decline due to the U.S.-China trade war. The amount of dollar deposits in the four banks reached $12.9 billion as of May 22, up $64 million from a month ago.
Until last month, most financial experts forecast the won to fall no further than W1,180 against the greenback, but even that proved optimistic. On May 17 the won closed at W1,195.7, and last Friday it still stood at W1,188. Many analysts expect the dollar to strengthen even further.
Dollar-denominated bonds are also booming since the value of debt products tends to rise at times of economic turmoil as U.S. interest rates decline.
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