Value context and insight. lkm@koreatimes.co.kr
Gold price to continue on upward spiral
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By Lee Kyung-min
By Lee Kyung-min
Gold prices are likely to continue to climb for the time being driven by elevated risk-averse sentiment due primarily to a longer-than-feared continuation of the COVID-19 pandemic, market watchers said Tuesday.
The demand for “safe-haven” assets will continue an uptrend given the elusive global economic recovery, compounded by recent signs of the drawn-out U.S.-China feud escalating, they said.
Also advancing the optimism is continued expansionary monetary policies put in place as part of emergency relief packages, pumping more money into the financial investment market already experiencing a liquidity overflow amid low interest rates.
According to the Korea Exchange (KRX), one gram of a 1-kilogram gold bar closed at 68,086 won ($55.56), Tuesday, down 1,814.74 won or 2.7 percent from the previous session during which the figure peaked at 70,000 won.
The Monday figure, first touching the 70,000 won mark, was over a 23.5 percent increase year-to-date from 56,540 won, and the highest since March 2014 when the domestic gold market first opened.
The gold price spiked at over 60,000 won per gram Jan. 8, following an oil price war between Saudi Arabia and Russia.
It fell below the 60,000 won mark the next day but began to pick up steam following the rapid spread of the novel coronavirus.
Spot gold was up 0.2 percent at $1,735.83 per ounce Tuesday (local time). U.S. gold futures gained 0.3 percent to $1,739.80.
Gold will remain bullish for the time being as uncertainty-driven risk-averse sentiment coupled with too much liquidity in the market leaves investors with little to no alternatives, Meritz Securities chief economist Stephen Lee said.
“The recent developments in the local and global financial and economic market gives investors no hope to regain risk-on mood,” Lee said.
Investors see opportunity in gold considering that the non-yielding yellow metal is not that bad an alternative compared to government bonds whose yields are on steep decline following a wave of key base rate cuts by central banks, according to Standard Chartered Bank Korea investment strategist Hong Dong-hee.
“Investors view gold, a safe-haven asset alongside government bonds, as a viable investment destination given yields on some government bonds have fallen into negative territory. Gold is as volatile as equity, but investors seem to prioritize not incurring losses promised by gold during times of extreme economic uncertainty such as now,” he said.