Expectations of US interest rate cut – Middle East instability
Safe assets are flocking in and rising sharply every day.
“Additional upside potential” “Decreasing trend within the year”
Experts have mixed views on future prices
International gold prices hit an all-time high for two consecutive days. As domestic gold prices are also soaring, investment funds are flocking to gold-related exchange traded funds (ETFs). Expectations of interest rate cuts by the U.S. Federal Reserve (Fed) and geopolitical crises, including in the Middle East, are interpreted as driving up the price of gold, a safe asset.
On the 5th (local time) at the New York Mercantile Exchange, the gold futures price for April delivery ended trading at $2,141.90 per ounce (31.1 g), up $15.60 (0.7%) from the previous trading day. It closed at $2,126.30 the previous day, exceeding $2,100 for the first time in history, and breaking the all-time high for two consecutive days. Gold prices, which have been on the rise since the second half of last year (July to December), have soared by about 17% in the past five months.
As the domestic gold price continues to hit new highs every day, the enthusiasm for gold investment among individual investors is heating up. In the Korea Exchange (KRX) gold market, the price per gram of 1kg spot gold reached an all-time high on the 4th (89,040 won), and then exceeded the 90,000 won mark for the first time on the 5th (90,810 won). According to FnGuide, the net assets of ‘ACE KRX Gold Spot ETF’, Korea’s only gold spot ETF, was 140.9 billion won as of the 6th, the highest ever. Net assets, which were only 77 billion won at the end of July last year, have nearly doubled in about seven months. It was found that individuals made net purchases of domestic gold spot ETFs worth 12.448 billion won this year.
The market believes that expectations of a Federal Reserve interest rate cut have pushed up the prices of alternative assets such as gold. This is because when the base interest rate falls and the dollar weakens, the price of gold, which is generally a substitute for the dollar, rises. In addition, it is analyzed that central banks, especially in emerging countries, are actively purchasing gold following the war between Israel and the Palestinian armed group Hamas, which is also influencing the rise in gold prices. Lee Hyo-seop, a researcher at the Korea Capital Market Institute, said of the gold price hitting new highs for two days in a row, “The price of Bitcoin, which had recently soared, plummeted early this morning, and as gold was recognized as a complementary good to Bitcoin, bets on gold instead of Bitcoin were affected by supply and demand. “It appears that the price of gold has once again reached its highest price.”
The outlook for the future trend of gold prices, which have truly entered a ‘golden age’, is mixed. There are polarizing views in the market, with one saying that “there is ample room for further upside” and the other saying that “the increase will soon be repaid.” Oh Jae-young, a senior researcher at KB Securities, said, “The price of gold is expected to rise to $2,400 between April and September of this year before and after expectations of interest rate cuts materialize.” He added, “Usually, the price of gold jumps once when the economy goes through a difficult phase, but it is difficult to say that it has jumped enough yet. “It’s not enough,” he said. On the other hand, Lim Hwan-yeol, a researcher at Shinhan Investment & Securities, said, “From a macroeconomic perspective, there are more factors for the gold price to fall than for the rise.” He added, “The gold price may continue to fall within this year as the situation continues to be excessively high compared to the real interest rate.” “He predicted.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.