While a win would have secured them a place in the 2019 FIBA Under-19 World Cup, the Gems will still have a chance to book their spot in next year's tournament via the Semi-Final qualifier on Thursday night.
They will face the third-ranked team from Group B in that do-or-die clash after every team earns a rest tomorrow following the conclusion of the group stage.
The signs were bad early for Australia as both teams suffered a slow start to their clash.
The Gems kept their opponents from hitting a field goal for almost five minutes but they soon found themselves trailing 2-8 once Korea found their range.
Isabel Palmer steadied the ship with seven points in the opening term but Korea's long-range shooting began to take its toll.
Foul trouble for Isobel Anstey and Jaz Shelley did not help Australia's cause and that, combined with Korea's three-point makes, saw them trail by nine points at half-time.
Australia still struggled to contain Korea out of the main break and at one stage, the Gems were shooting 1-18 from beyond the arc while being out-scored from that spot by 21.
Korea pushed out to a game-high 15-point lead nearing three-quarter time before Anstey was able to exert her influence, scoring six consecutive points to trim the deficit back to single-digits.
With everything on the line, the Aussies were desperate in the final stanza and they began to inch closer courtesy of Anstey (19 points, 15 rebounds) and some great hustle plays from Agnes Emma-Nnopu (ten points, six boards, two steals).
Her full court pressure also made Korea nervous and a couple of turnovers gave the Gems some easy baskets as they made it a one-possession game inside the last two minutes.
Shelley (eight points, four assists) then drilled a three to tie things up and Australia had all the momentum but Korea were able to answer with a mid-range jumper to take a one-point lead with 4.6 seconds on the clock.
Out of a time-out, the Gems drew up a play for Anstey under the rim but she just could not get a clean look as Australia's incredible comeback fell agonisingly short.
Find the box score here and watch the replay below.
Stay tuned to Basketball Australia's social media channels for the Gems' Semi-Final qualifier opponent on Thursday night as well as tip-off time.
The 2018 Australian Gems Schedule for the FIBA Under-18 Asian Championships (all times AEDT):
October 28: Australia def. Indonesia (96-28)
October 29: Australia def. Chinese Taipei (106-66)
October 30: Australia def. by Korea (62-63)
November 1: Semi-Final Qualifier
November 2: Semi-Finals
November 3: Medal Games