High inflation drives gold vending machine boom

To allow investors in South Korea to indulge their desire for gold bars as inflation protection while shopping at convenience stores, five gold bar vending machines were set up on a trial basis in September 2022, offering gold bars in five sizes ranging from 0.13 to 1.3 ounces. By the end of April 2023, about US$19 million worth of gold bars had been sold this way, and operating company GS Retail has set up 29 gold vending machines to date, according to a UPI News Korea report, with plans to have 50 in operation by the end of 2023.

It all started in Frankfurt am Main, Germany, in 2009

The oldest and most famous gold vending machine to date started operating in 2011 at the Emirates Palace Hotel in Dubai. At the time, numerous media around the world reported on the vending machine, which was – of course – gold-plated and offered a total of 320 different gold items, including 10-gram bars and gold coins. The gold price was updated every minute via a protected internet connection. The prototype of this gold vending machine, which was later also distributed in the US, Italy, Austria, Switzerland, Great Britain, Portugal, and several countries in the Middle East, was previously installed on a trial basis in Frankfurt am Main, Germany, in 2009 and offered 1-gram gold bars. However, the selling price for the gold bars was about 30 per cent above the spot market price for gold. Perhaps this, along with the low inflation rate in the 2010s, was a reason why the number of gold vending machines in Europe did not grow as rapidly as it currently is in South Korea.

Gold-backed ETCs: much more cost-efficient

Investors in gold bars face the basic problem of a lack in market transparency and, as a consequence, usually wide trading margins. ETCs such as Xetra-Gold, on the other hand, can be bought or sold at the narrowest spreads – comparable to those of heavily traded stocks. In addition, Xetra-Gold tracks the cheaper wholesale price, passing this advantage directly on to customers. This cost efficiency is reflected in a more sound performance of the precious metal and thus in a better inflation protection.