Soaring Gold Prices Stall Due to Strong Dollar... Will They Rebound?

[Asia Economy Reporter Koh Hyung-kwang] The sharply rising gold prices have recently shown signs of stagnation. It is analyzed that the strength of the US dollar is suppressing gold prices. However, experts predict that the upward trend will resume in the mid to long term.

According to the financial investment industry on the 2nd, the price per gram of 1kg gold spot in the Korea Exchange (KRX) gold market closed at 70,780 won on the 29th of last month, down 5.6% compared to the end of August a month earlier. On the 24th of last month, the price per gram fell to the 60,000 won range for the first time in over two months since July 13. Compared to 81,000 won per gram on July 28, it dropped 11.6% in two months.

Gold prices, which were in the 56,000 won range per gram at the beginning of this year, showed a steep rise to the 80,000 won range by the end of July. The recent decline in the soaring gold prices is attributed to the rise in the value of the dollar, which usually moves inversely to gold. Recently, concerns over lockdowns have increased due to the resurgence of COVID-19 in Europe, and delays in additional stimulus package agreements in the US have contributed to the strength of the dollar.

There is also analysis that volatility may increase further as the US presidential election approaches next month. Choi Jin-young, a researcher at eBest Investment & Securities, said, "Since 1968, a strong dollar has appeared in September and October before the US presidential election," adding, "Considering President Trump's remarks opposing the election results and mail-in voting, a recount card may come out depending on the outcome, and if realized, gold prices could fall to $1,800 per ounce."

However, many view that gold prices will trend upward in the mid to long term. eBest Investment & Securities expects international gold prices to rise to a maximum of $2,300 per ounce within the next 12 months. Researcher Choi said, "Considering the absolute large supply of US dollars, the mid to long-term direction of the dollar is still weak," and added, "Also, considering the negative oil prices in the first half of this year, the oil price growth rate is expected to reverse to positive in the first half of next year, which could lead to increased expected inflation and maintain inflation hedge demand."

NH Investment & Securities maintained its 12-month target price forecast of $2,200. Hwang Byung-jin, a researcher at NH Investment & Securities, stated, "As long as the global monetary easing policy led by the US Federal Reserve, which announced the average inflation targeting at the September FOMC (Federal Open Market Committee), is maintained, concerns about precious metals having passed their peak are premature."

Jeon Gyu-yeon, a researcher at Shinhan Financial Investment, also said, "Despite the decline in gold prices, net inflows into the world's largest physical gold ETF product, 'SPDR Gold Shares,' have reached the highest level since June this year, and gold holdings in global ETFs are steadily increasing," adding, "Expectations for gold remain high."

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