"Gold Price Decline Presents Opportunity to Increase Holdings"

[Asia Economy Reporter Song Hwajeong] The price of gold, which had been soaring, has recently stalled. The market views the recent price decline as an opportunity to increase the proportion of gold holdings.

On the 14th (local time) at the New York Mercantile Exchange, December delivery gold closed at $1,949.80 per troy ounce, down 1.1% ($20.60) from the previous day. On a weekly basis, it fell 3.9%, marking the first decline in 10 weeks since early June.

Gold surpassed the $2,000 mark for the first time ever on the 4th but then weakened, dropping 4.6% ($93.40) on the 11th, the largest decline in seven years since April 15, 2013, in terms of amount.

Park Kwangrae, a researcher at Shinhan Financial Investment, explained, "The rise in real interest rates affected gold prices," adding, "The yield on the U.S. 10-year Treasury Inflation-Protected Securities (TIPS), which reflects real interest rates, fell from 0.15% at the beginning of this year to -1.08% on the 6th, then rebounded to 0.99% on the 11th." Strong U.S. economic indicators also contributed to the decline in gold prices. In July, U.S. nonfarm payrolls increased by 1.462 million compared to the previous month, maintaining growth for three consecutive months. The U.S. Producer Price Index for July rose 0.7% from June to 202.7 points, exceeding market expectations. Park said, "Profit-taking following the recent short-term price surge and the increase in margin requirements for gold futures trading on the Chicago Mercantile Exchange are also estimated to be causes of the gold price decline."

This decline in gold prices is seen as an opportunity to increase holdings. Park said, "The recent drop in gold prices should be seen as an opportunity to increase gold allocation from the perspective of improving returns and managing portfolio volatility," explaining, "Given that the end of the COVID-19 pandemic cannot be guaranteed in the short term and the low interest rate environment is expected to continue for a long time, the relative investment attractiveness of gold will be maintained." He added, "After a short-term pause, a recovery to $2,000 within the year is possible."

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