"Coin Investment is Risky"... The Return of Gold as an Inflation Hedge

6,8550 KRW per gram... Approaching this year's highest price
Safe asset demand surges amid cryptocurrency instability

[Asia Economy Reporter Ji Yeon-jin] Gold prices, which had been weak earlier this year, are on the rise again. As concerns about inflation caused the stock market to undergo adjustments, the volatility of cryptocurrencies, including Bitcoin, surged, leading to increased demand for inflation hedging in the safe-haven gold market.

According to the Korea Exchange on the 21st, 99.99K pure gold closed at 68,550 KRW per gram the previous day, marking the highest price in the past three months. It approached this year's highest price of 69,230 KRW (January 6). Gold prices rose to 80,000 KRW in August last year amid the global COVID-19 pandemic, then gradually declined, falling further after vaccine distribution began in December of the same year. In March, prices dropped to the 62,000 KRW range but started to rebound in April, with a steeper upward trend this month.

The recent rise in gold prices is analyzed to be due to weakened risk asset preference caused by the sharp drop in cryptocurrency prices such as Bitcoin, and an expanded preference for safe-haven assets. Bitcoin prices, which surged since December last year, soared to 81 million KRW last month but recently fell below the 50 million KRW level. Investment demand that had shifted to the cryptocurrency market for inflation hedging due to COVID-19 vaccine distribution is interpreted as returning to gold. According to Hana Investment & Securities, funds rapidly flowed into Bitcoin trusts from the fourth quarter of last year, but Bitcoin trust funds sharply decreased this month while inflows into gold products increased. Therefore, it is expected that gold investment will increase as cryptocurrency volatility grows.

However, there is also a forecast that the possibility of gold prices surpassing previous highs is limited. This is due to uncertainties regarding the timing of the U.S. economic recovery and the Federal Reserve's tapering (reduction of quantitative easing). Jeon Gyu-yeon, a researcher at Hana Financial Investment, said, "U.S. economic indicators are still mixed, so the upward momentum of interest rates will be limited," adding, "Relatively stable interest rate trends and a weak dollar are expected to support gold price increases for the time being."

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