Dollar and Gold Drop from Peak... Investment, 'Not Sure'

Gold Price Surge Triggers 'Profit-Taking', Gold Account Balances Plummet
Dollar Deposits Slightly Increase, "Investment? Not Sure"

Kim Yuhwan (31), a young professional, has recently been contemplating the production of couple rings. The cost for making two 18k rings quoted at a visited jewelry store was about 1.5 million won. Surprised by the significantly higher price compared to previous inquiries, he is uncertain whether it is better to buy now, given that gold prices have slightly dropped from their peak recently, or to wait and see.

Office worker Park Jungkyu (35) has been closely watching the won-dollar exchange rate these days but has not come up with a clear strategy. Last year, he enjoyed good returns due to a strong dollar in the second half, but this year, expectations of interest rate cuts continue. He said, "I will keep the dollars I have in a foreign currency deposit at the bank and observe the situation going forward."

As the dollar and gold prices have peaked and entered a correction phase, investors interested in safe assets are facing deeper dilemmas. Recently, with growing expectations of interest rate cuts, investors' attention is shifting from safe assets to stocks and long-term bonds.

According to the financial sector on the 16th, the foreign currency deposit balance at the four major domestic banks (KB Kookmin, Shinhan, Hana, Woori) was about 55.4 billion dollars as of the 13th. This is an increase of about 1.8% compared to the previous month (54.4 billion dollars). Previously, the foreign currency deposit balances at the four banks had been declining since January (about 61.1 billion dollars), with February (about 56.1 billion dollars), March (about 56.5 billion dollars), and April (51.9 billion dollars) showing a downward trend.

The increase in dollar deposits since last month is interpreted as a slight rise in demand for buying dollars due to the decline in the won-dollar exchange rate. This is because the won showed relative strength amid expectations for a recovery in the Korean memory semiconductor market and the Federal Reserve's (Fed) moderation in tightening pace.

However, experts analyze that it is difficult to view the recent trend as a sustained upward movement, so investments aiming for exchange gains should be approached cautiously. Heo Dokyung, PB team leader at Shinhan Bank PWM Mokdong Center, said, "Downward pressure on the dollar remains in the second half due to factors such as the slump in the U.S. commercial real estate market, and it is necessary to closely monitor the overall domestic manufacturing situation related to the won."

What about gold, a traditional safe asset? The gold banking balance at three major banks (KB Kookmin, Shinhan, Woori) was 496.5 billion won as of the 13th. This is about a 16.2% decrease compared to April (592.8 billion won). In May, international gold prices briefly surpassed the $2,000 per troy ounce (T.oz = 31.1g) mark, approaching previous highs, which likely led to many investors realizing profits.

It is also advised to watch gold prices for a while. A representative from a commercial bank said, "It is questionable whether gold prices, which approached previous highs, have much room to rise further, and even if they do, actual returns may vary depending on the won-dollar exchange rate," adding, "Gold is increasingly regarded as an alternative asset for inheritance rather than for capital gains."

Investors' interest is shifting away from safe assets toward the domestic stock market and long-term bonds. Despite limited gains in the domestic stock market in the first half due to incidents like the SG Securities scandal, there are forecasts that the economy will recover in the second half, centered on the semiconductor market. Additionally, many investors are showing interest in long-term bonds, anticipating future interest rate cuts.

Kim Haksoo, PB team leader at Hana Bank Jamwon Branch, said, "Looking at customers, many say they will consider buying dollars if the price drops about 60 to 70 won from the current level, and gold if prices fall about 5 to 6% from the current level," adding, "Since the U.S. stock market has already risen significantly, more customers are considering investments in the domestic stock market or long-term bonds with interest rate cuts in mind."

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