Only gold bars minted officially at Korea Minting, Securities Printing, and IC Card Operating Corp. can be traded on the market to ensure quality
A slew of dignitaries is seen at a ceremony to open the gold trading market
at Korea Exchange (KRX) on March 24 led by Chairman Shin Je-yoon of
Financial Services Commission and KRX Chairman & CEO Choi Kyung-soo,
among them. (Photo: KRX)
Korea Exchange (KRX) opened its gold trading market on March 24, allowing gold bars to be traded on its floor just like securities and futures with a major purpose being to tax gold transactions like any other goods and property transactions by having them traded on the stock exchange and recorded in a transparent manner and no longer traded outside the bourse on a so-called ¡°black market,¡± dodging taxes, the KRX said on March 20. It is part of the government¡¯s moves to reduce the ¡°underground trading¡± of anything so that they can be taxed.
KRX Chairman & CEO Choi Kyung-soo said gold accessories like gold rings can create added values with their competitiveness as precious metal accessories at the market, and investments in gold should be made at the commodities market like securities in a transparent manner.
The gold market is operated like the securities market at the KRX -- opening at 10 a.m. and closing at 3 p.m. each day -- although opening an hour later than the stock market.
The quotations on prices will start from 9 a.m. and close at 10 a.m. and from 2.30 p.m. to 3 p.m., daily with sales made only at the same price. A single price is selected among those quoted during those hours and sales are made in lump sum for those buyers who want to buy gold bullion at the selected price. Gold is traded freely at other hours based on prices quoted during those hours.
Gold traded on the spot market will have its trade prices and volumes posted like those for securities at the KRX.
The fees paid to the KRX on gold trading will be exempt for a year until March 2015. The Korea Securities Depository said around 300 billion won in taxes from gold trading would be collected, while the black market trading of gold will fade eventually and the supply of gold will be stabilized spurring the development of the precious metals market and other related industries in Korea. They also expect the nation¡¯s foreign exchange reserves will be strengthened through the gold spot market and also enhance the competitive power of the precious metals industry as only the gold bars minted at Korea Minting, Securities Printing, and IC Card Operating Corp. can be traded on the spot gold market, ensuring the quality of gold bars traded.
The gold spot market will also insure that gold prices are based on the gold traded at the spot market with many buyers and sellers of gold freely coming to an agreement on market prices.
But there are some negative voices heard on whether the gold traders in the black market would join the spot market for gold when it is opened as they are reluctant to present papers to be taxed on their gold transactions, contrary to their current practices with no papers and no taxes. The buyer should deposit 100 percent of the funds they have to pay to the sellers of the gold bars with Korea Securities Depository (KSD) and the sellers of gold bars, too, have to deposit the gold bars they want to sell on the spot market with the KSD in accordance with the regulations on the gold spot market¡¯s operation. Gold trading will be done based on the home trading system, mobile trading system, and via telephone. The gold traded from 9 a.m. to 10 a.m. can be delivered to the buyers on the same day, while gold traded during other hours will have their gold bars delivered the next day.
KRX officials feel they will need at least a year to fully iron out any kinks in the spot gold market. Domestic gold prices are intimately related with international gold prices, which have risen sharply lately due to the Ukraine crisis and the lunar new year in China and will soon fall as time passes. Therefore, it is better for gold buyers to wait before they buy gold to hedge their other investments, so advises an official of Woori Investment and Securities.
For example, the price of gold at the New York Comex fell to $1,359 per ounce on March 17 from $1,372 per once on March 16, the day before, but it is still up compared to the price quoted on Jan. 2, which was $1,225 per ounce, the official said.