Gold Prices Hit Record Highs Consecutively... Will They Double Within 18 Months?

[Asia Economy Reporter Koh Hyung-kwang] The price of gold is soaring day by day. The spread of COVID-19 has strengthened the preference for safe-haven assets, driving gold prices to new highs. Experts predict that excessive liquidity supply through quantitative easing and the continued low-interest-rate environment could continuously stimulate gold demand. Major U.S. investment banks have also forecasted that gold prices could nearly double within the next 18 months.

According to the Korea Exchange on the 1st, the spot price of gold on the KRX Gold Market closed at 67,450 KRW per gram on the previous trading day, the 29th of last month, up 0.49% (330 KRW) from the previous day. Although there was slight adjustment on the 27th and 28th of last month, the upward trend is resuming. Earlier, on the 24th of last month, the price closed at 68,860 KRW per gram, marking the highest level since the KRX Gold Market was launched in March 2014.

In its inaugural year, 2014, the average daily gold trading volume on the KRX Gold Market was a mere 5.5 kg. However, as gold has been recognized as a safe-haven asset and the KRX Gold Market prices are often cheaper compared to international rates, domestic investors have increasingly turned to the KRX Gold Market. This trend is reflected in explosive growth in trading volume. This year, the average daily gold traded on the KRX Gold Market reached 95 kg, more than double last year's average daily volume of 43.6 kg.

Gold, a representative safe-haven asset, generally rises in price when market uncertainty increases. Last year, gold was spotlighted as a safe-haven amid the turmoil of the U.S.-China trade dispute, with prices rising continuously. Gold prices on the KRX Gold Market increased by 21.6% last year, and related financial products such as funds, ETFs (Exchange-Traded Funds), and ETNs (Exchange-Traded Notes) also gained significant popularity.

Recently, as financial market anxiety has increased due to the spread of COVID-19, the preference for safe-haven assets has risen, leading to explosive growth in gold demand. Additionally, with the U.S. Federal Reserve implementing quantitative easing policies, concerns over the depreciation of the U.S. dollar have further increased gold demand. Although gold prices are hitting record highs daily, many analyses suggest there is still room for further price increases. NH Investment & Securities forecasted in a report last month that the international gold price will reach 2,000 USD per ounce next year, and Hanwha Investment & Securities also predicted additional price gains.

U.S.-based investment bank Bank of America (BOA) recently stated in a report that due to central bank stimulus policies and economic recession, gold has attracted record interest and is expected to rise by 80% over the next 18 months. Shim Soo-bin, a researcher at Kiwoom Securities, said, "During the COVID-19-induced recession, there was a strong tendency to secure cash rather than gold, but with the U.S. entering quantitative easing and central banks worldwide injecting liquidity, concerns about the depreciation of currencies like the dollar have reversed the trend. Excessive liquidity supply continues, and with interest rates falling, gold demand can be continuously stimulated."

This content was produced with the assistance of AI translation services.