Gold ATMs Return, Gangnam Style
Tuesday, 6/18/2024 10:01
Today in 'Pure BS about gold...'
IF YOU PUT a vending machine full of tiny gold bars into a convenience store here in Hammersmith, London,
writes Adrian Ash at BullionVault...
...or anywhere else in the UK, come to that...
...I think you would see your ATM stolen with sledgehammers, a truck or
maybe a digger before the sun comes up tomorrow.
But in South Korea, apparently, it works the other way round.
Because gold vending machines are doing the robbery.
"One recent afternoon," gushes the
Joong Ang news site, "an office worker entered a GS25 convenience store in Gangnam, Seoul and
stopped in front of a golden vending machine.
"The product which Ms.Oh chose was 1g of 24K pure gold."
Her price for 1 gram of gold?
Ms.Oh apparently paid 160,000 Won for that tiny nugget...
...exactly 50% above the value of the bullion it contained that day...
...and dearer even than the kind of profit margins you would shell out for a 1 gram flake from the leading US or even UK retail gold outlets.
But eager buyers in Korea can actually pay steeper mark-ups to join this hot trend if they like. The half-gram flake spat out by GS Retail's vending machine
costs 68% above spot according to numbers published by Bloomberg...
...also filing a breathless report from "the corner of a bustling street in Seoul's affluent Gangnam district." Maybe the same corner of the same street, perhaps.
Look, I don't know what the gold-business numbers at convenience store GS Retail really look like.
But last June, the firm said it had sold around $19 million of gold through its vending machines in Korea across a 9-month trial.
Whereas in June 2024, "Currently we are seeing about 30 million Won of sales per month,” says a GS spokesperson
to the media...
...less than $22,000 in US Dollar terms in total, and barely $700 per machine per month from the 30 units which GS says it has installed so far.
So across 3 months, that would equate to maybe $65,000 of total gold-vending machine sales in Korea...
...home to a coin and small-bar market
which saw total net demand reach over $300m across January to March according to data gathered by specialists Metals Focus and published by the mining industry's World Gold Council.
Put another way, the headline above this latest rash of gold ATM stories should say at best that "Vending machines grab 0.02% of Korea's retail gold investing market"...
...rather than
pretending that "Young Koreans flock to 'gold vending machines' as prices soar".
But that's not how PR or the news media work. If it were, how much coverage do you think
the Costco gold nonsense would have bagged earlier this spring? And why would the idea of gold ATMs just keep coming back, year after year?
"Today, the world's first 'Gold To Go-Machine' is being presented to an international audience at Frankfurt Airport," said a press release from long-gone German company TG Gold-Super-Markt
exactly 15 years ago Sunday.
"This is more than a marketing gimmick," claimed the founder and boss...
...even as he also told the
New York Times that,
yeah, actually, it was just a marketing gimmick to try promoting his retail gold bullion store.
Whether or not the thing ever turned a profit, or succeeded in boosting the coin shop's sales, the internet doesn't say today. The only traces that remain are the gushing press stories from each time the Gold To Go ATM turned up in a new location...
...whether
Abu Dhabi in mid-May 2010...
...or
Florida that December...
...or even London (!) at the
Westfield shopping mall in July 2011.
None of those machines are still there, of course. Not because of sledgehammers or bulldozers, but because the PR buzz came and went. And came again. Only to go again. But that still hasn't stopped other people trying the idea too!
"Master Gold Egypt has partnered with local e-payment technology company Finway to launch the first gold ATM in Egypt,"
said the local press in one of gold's hottest Middle East markets last November.
"Details regarding the precise location have not yet been revealed."
Same in India, world No.2 for private-sector gold demand. "ATM now dispenses gold coins"
gushed the local press back in late 2022.
"Gold ATMs are expanding! More locations to turn cash into gold"
But so far, 18 months after launch,
only 2 are operating according to GoldSikka, the company behind India's own rash of gold ATM hype and hope...
...one of them at its own office.
Why does the world's media keep falling for this stuff, time after time?
- First, gold plus ATM is a great story. Bubblegum for the brain, yes, and not actually an important trend or technology anywhere in reality. But I mean, gold out of a vending machine? What click-seeking news editor wouldn't love that?
- Second, gold gets such little coverage most of the time...especially in the West...that journalists and financial editors can sometimes display the collective memory of a goldfish. Besides, who cares if the story is nonsense, whether for the first or 10th time? Just count those clicks and resulting advert impressions!
- Third, and in the first-half of 2024 specifically, the price of gold has surged to new record highs. Something must explain it. And besides, clicks!
So while you don't need me to explain how a couple of 1-gram bars simply aren't part of gold's recent all-time highs, some of the people paid to write about our market seem to need help.
Take the Costco gold story, for instance.
"Gold prices red hot as Costco gets in on gold rush," gasped
Forbes magazine in April, repeating PR the US-based discount store had already been pumping out for 6 months and more in the USA and UK (and which began way back in 2020 in, umm, Iceland).
The headline suggested that sales of small gold bars at Costco were somehow driving gold higher. Which was, of course, pure nonsense.
But like we noted earlier this spring, "Fade the detail versus the impact" when it comes to
this Costco gold frenzy. Because as Swiss refining giant MKS Pamp's strategist Nicky Shiels has since put it,
"What matters is sentiment...
"Media coverage has exploded," she explains...writing in the London Bullion Market Association's
Alchemist magazine..."with featured articles in CNBC,
New York Times, FoxBusiness and Axios (to name a few), and a segment on Good Morning America (GMA) bringing inflation fears and gold bars into Americans' living rooms."
Hence the jump in Google searches for the words "Costco gold" shown on MKS' chart above. Thanks to the PR juggernaut, it even overtook the words "buy gold" among searches in April worldwide!
Perhaps that signals something big, like Shiels at MKS says...
...the start of a new phase for gold investment, where PR hype and everyday shopping trips collide to make the idea of buying bullion a regular, ordinary and more widespread thing than ever before.
Against that, however, comes the blunt fact of USA and other Western households
staying shy of gold overall so far this year. Indeed, and in terms of actual behaviour, the biggest jump for precious metals in North America and Western Europe so far this year has been to sell gold...
...not to buy it with both hands like emerging-market central banks and Chinese households have done.
Yes, Google searches for the words "sell gold" have continued to lag behind "buy gold" so far this year. But they
came closer to matching it this April than even at the top of the global financial crisis (and the peak of the 'cash for gold' scrap boom) back in 2011, albeit not as close as during
2022's sudden profit-taking in gold when Russia invaded Ukraine.
What people type into Google and what they actually do, in other words, can be two different things. But those words do offer a guide to sentiment...
...not least to the pent-up bullish frenzy which financial journalists and editors in the West have seemed so keen to urge into being in the first half of 2024.
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