Why is South Korea Buying Gold? What Does it Mean for Gold?

South Korea has recently tripled its holding in gold from 14.4 to 39.4 tonnes. This had immediate impacts on the price of gold, since a large purchase drove up the price. However, what are the underlying causes of this purchase and what do they mean to the economy and the price of gold?

Perhaps this betrays an underlying pattern. Let us try to discern it through questioning. Why is South Korea buying gold? It is rather obvious to those familiar with the dynamics currently swirling through the global markets. Also, an understanding of gold illumines the reasons for South Korea purchasing large amounts of it.

Gold has been rising steadily as the aftershocks of the 2008 economic crisis betray weaknesses spread throughout the global economy. The United States is on imperial adventures overseas while, at home, debt mounts and their economy faces difficult challenges. Europe faces a debt crisis the likes of which nobody has ever seen. China, India, and the rest of the world increasingly turn to gold as a safe haven to currencies and the stock markets.

Basically, gold is king. It is king because of the qualities of it: gold exists for long periods of time. It is stable. There is only so much in the earth. The rate at which it can be mined and refined is governed by physical laws. Gold is real. It is able to be converted into national currencies all around the world. From there, it can be traded for commodities or invested into stocks. It can do everything that money can, but without facing and suffering from these severe economic problems.

Also, gold makes a great investment. Supply, as I mentioned, is limited. Demand can rise much faster than supply. That is what is happening now. If the economic situation deteriorates further, there is no reason for gold to get hit. This is because gold is rarely used in industry, so an industrial slowdown doesn't hurt the price of gold. In fact, it helps the price of gold. Gold will have much more relative purchasing power in the years to come.

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