Demand for Gold, 50,000 won notes climb in South Korea

SEOUL(BullionStreet): Four years after it’s introduction, South Korea’s 50,000 won currency joined gold to become hot favorite among Korean people.

According to Bank of Korea during the first four months of this year alone, the amount of 50,000 won banknotes in circulation as of April reached 35.52 trillion won ($31.83 billion).

The amount increased by 3.76 trillion won in May.It is almost double the increase from the same period last year of 1.92 trillion won.

Analysts said demand is soaring after the new government led by Park Geun-hye vow to tax the underground economy, fourth largest in Asia.

The 50,000 won note ratio to the total currency issuance increased from 49.2 percent in 2011 to 65.9 percent this year.

Gold demand picked up in Korea as some banks have started carrying gold in their branches as there are increasing demands from private banking customers.

Analysts said a bank in the country sells 200 kilograms of gold per month on average.

Banks’ gold sales are made in a legitimate manner as value-added tax is imposed on deals. But gold market officials said it is presumed that about 60 to 70 percent of trading in the 5 trillion won domestic gold market has been made in unconventional ways to avoid taxation.