Record-Breaking 'Golden Sprint', How Far Will It Rise?

KRX Gold Market Hits Intraday High of 70,000 KRW per Gram
Safe-Haven Gold Strengthens Amid COVID Resurgence and Economic Recession Concerns

[Asia Economy Reporter Eunmo Koo] Gold prices continue to show strong momentum, with prices reaching record highs on the KRX Gold Market. Persistent fears of a resurgence of COVID-19 and concerns over an economic recession have driven demand for gold as a safe-haven asset. Factors such as the US-China trade dispute, inflation prospects, and the pace of vaccine development are expected to act as variables going forward.

According to the Korea Exchange on the 19th, the price per gram of 1kg gold spot on the KRX Gold Market closed at 69,840 KRW, up 1.73% (1,190 KRW) from the previous trading day. During the session, it even rose as much as 1.97% compared to the previous day, reaching 70,000 KRW, setting a new record high. Gold prices have also shown continuous strength in overseas commodity markets. According to Bloomberg, on the 15th, gold prices on the New York Commodity Exchange (COMEX) rose to 1,756.30 USD per ounce (oz).

Related exchange-traded products (ETPs) also showed an upward trend. Shinhan Leverage Gold Futures ETN (6.9%), KINDEX Gold Futures Leverage (Synthetic H) (6.3%), and Samsung Leverage Gold Futures ETN (H) (5.5%) have recorded returns exceeding 5% so far this month through the previous day. During the same period, KODEX Gold Futures (H) (2.8%), TIGER Gold Futures (H) (2.8%), and Shinhan Gold Futures ETN (H) (2.7%) also showed gains, contrasting with the KOSPI, which fell by 0.5% during this period.

Although global expectations for economic normalization have recently increased, ongoing concerns about the resurgence of COVID-19 and disputes between the US and China over responsibility for the virus continue to support the strength of gold as a safe-haven asset. Hwang Byung-jin, a researcher at NH Investment & Securities, explained, "The recent sustained strength in gold is mainly driven by the global monetary easing policy, and even after COVID-19 lockdowns are lifted, the need to hold safe-haven assets remains due to economic uncertainties and US-China conflicts." Additionally, the possibility of negative interest rates appearing in the US bond market is increasing investment demand for gold and silver, which are interest-free assets within safe-haven assets.

Gold prices, which are both a safe-haven and an inflation hedge asset, are expected to continue their strong performance for the time being. Shim Hye-jin, a researcher at Samsung Securities, analyzed, "Although the current inflation possibility is low due to the sharp drop in energy prices, in the mid-to-long term, if intensified protectionism and global reshoring after COVID-19 cause supply-side price pressures, the investment appeal of gold as an inflation hedge asset could increase."

According to a Bloomberg survey conducted last month targeting investors, 49% responded that gold prices would reach between 1,650 and 1,840 USD per ounce by the end of this year, the highest proportion. Park Kwang-rae, a researcher at Shinhan Financial Investment, said, "Since gold does not generate its own cash flow, market participants' price expectations have a significant impact on actual price formation rather than absolute valuation. Considering the recent reignition of US-China trade dispute risks compared to April when the survey was conducted, market expectations may have risen somewhat."

However, it is pointed out that the potential for further price gains may be limited for investors seeking capital gains. Although there is potential for future increases, prices have already risen considerably, and alternative assets exist. Researcher Park said, "Unlike in the past, there are now safe-haven asset groups that can substitute gold, such as palladium, Bitcoin, and the US dollar, so the momentum for gold's rise may not be as strong as expected."

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