[PB Notebook] Overheated Gold Investment... When Listening to Experts' Opinions

Expert Advice is Crucial When Investment Products Overheat
Consulting Professionals Helps Minimize Losses During Market Downturns

▲Park Hyun-sun, Team Leader at KB Kookmin Bank Jamsil Lotte PB Center

Recently, the demand for gold investment has been so intense that gold bar sales were suspended. Additionally, in the stock market, shipbuilding and defense stocks showed a surge, with prices more than doubling in a short period.

Of course, there are valid reasons behind the price increases of certain investment products. Firstly, the gold investment craze was driven by investors' expectations of rising global gold prices. With the inauguration of the second Trump administration, investors who could not find suitable investment destinations flocked to gold, considered a stable asset amid inflation concerns. Moreover, central banks of countries such as China also boosted demand for gold, causing international gold prices to rise sharply.

The rise in shipbuilding and defense stocks was also based on solid corporate value. As the wars in Ukraine and Israel approached their end, the post-war period is seen as the prime time for the defense industry to replenish emptied warehouses. Shipbuilding is also expected to see increases in sales and net profits, with hopes of benefiting from the Trump administration.

At times like these, expert opinions are crucial. If one had consulted experts when the domestic gold price began to diverge from the international gold price, they likely would have received a warning. While experts agree on the long-term upward trend of gold and view holding a portion of assets in gold positively, they advise caution when the divergence from international prices widens rapidly. Although liquidity inflows may provide room for further price increases, entering the market at such times is risky because the divergence will eventually narrow. In the past, we witnessed divergence rates exceeding 1000% in crude oil futures ETNs. Sudden surges in investment demand create supply and demand issues that lead to high divergence rates. However, once the investment frenzy subsides and supply-demand issues are resolved, the high divergence narrows, and the market price is restored, often causing losses for investors during this adjustment period.

Based on these past experiences, when an investment product shows signs of overheating, it is necessary to listen to experts and assess the current situation. While the responsibility for investment lies solely with the individual, understanding the objective situation significantly affects how one copes with a subsequent downturn. Ultimately, this is directly related to the scale of losses.

By consulting experts and making investments based on data and future outlooks with confidence, investors can endure downturns with assurance in their choices.

Hyunseon Park, Team Leader, KB Kookmin Bank Jamsil Lotte PB Center

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