As the Dollar Value Drops, Gold Prices Surge and Silver Prices Also Fluctuate

Gold and Silver Futures Prices Rose 9% and 26% Respectively Over the Past 3 Months
"Long-Term Approach Valid... Silver Demand to Increase Further with China's Reopening"

[Asia Economy Reporter Minji Lee] As the value of the dollar has sharply declined, investors' attention is focusing on products investing in gold and silver. Since gold and silver are traded in dollars, their value tends to rise when the dollar weakens. Experts predict that considering the Bank of Japan (BOJ)'s mention of a shift in monetary policy and the burden of tightening due to recession concerns, gold and silver prices will continue an upward trend in the long term. Furthermore, since silver has a strong industrial metal characteristic, it is expected to benefit if China's 'Zero COVID' policy repeal is fully implemented.

According to the New York Commodity Exchange (COMEX) on the 22nd, as of the 21st (local time), the price of gold futures for February next year recorded $1,824.60 per troy ounce. It rose about 4% over the past month since November 21st ($1,739.60). Over the recent three months, it increased by 9.51%. Although the gold price fell to $1,610 amid the 'King Dollar' phenomenon where the dollar value sharply rose, it showed an upward trend as the dollar weakened since last November. Silver showed a similar pattern. As of the 21st, the price of silver futures for March next year was $24.20 per troy ounce. The one-month increase rate reached 15%. Expanding the period to the recent three months, the increase rate approached 26%.

The main reason for the dollar's weakness is the expectation of a shift in the U.S. Federal Reserve (Fed)'s monetary policy. As recession concerns grow, it is judged that the Fed will feel the burden of strong tightening. Additionally, the European Central Bank (ECB) and the Bank of England (BOE) have maintained hawkish stances and continued raising interest rates, which also contributed to the dollar's decline. Recently, the Bank of Japan (BOJ) mentioned ending the ultra-low interest rate era, further strengthening the dollar's weakening trend. The dollar index, which indicates the average value of the dollar against six major world currencies including the euro and yen, was around 110 points in early last month but currently points to 104, down 6%.

Fed’s Strong Willingness to Raise Interest Rates... Watch Dollar Trends Closely

As gold and silver prices surged, investors in exchange-traded products (ETPs) such as exchange-traded funds (ETFs) and exchange-traded notes (ETNs) investing in these products are estimated to have earned considerable profits. The ‘TIGER Gold Futures’ ETF, which tracks gold futures prices listed on the U.S. Commodity Exchange, recorded a return of over 7% in the past three months. The ‘TIGER Gold and Silver Futures’ ETF, investing simultaneously in gold and silver futures, posted a return in the 9% range during the same period. ETN products investing in silver futures recorded even higher returns. The ‘Samsung Silver Futures ETN’ yielded nearly 25%. The ‘KB Leverage Silver Futures ETN,’ which seeks twice the movement of the underlying index, achieved a return of 51%.

Experts advise that those considering investing in gold and silver should pay attention to the dollar's movement in the short term. Since the Fed strongly expressed its intention to raise interest rates at the December Federal Open Market Committee (FOMC), the prevailing opinion is that vigilance regarding the dollar's movement should not be relaxed until early next year.

From a long-term investment perspective, investing in silver is expected to be more effective than gold. Since silver also has characteristics of an industrial metal, if the Chinese government's efforts for economic recovery become more concrete, demand for silver may increase. In particular, silver has important uses in the solar power industry. Hwan-Yeol Lim, a researcher at Shinhan Financial Investment, said, “If the reopening effect of China is reflected, the investment return on silver will be better,” adding, “Due to the burden of economic slowdown, tightening policies will inevitably show limits, so precious metals are expected to show an upward trend next year.”

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