Value context and insight. lkm@koreatimes.co.kr
Gold rallies to record high on optimism over Fed's pivot
Gold bars are on display at Korea Gold Exchange, Tuesday. Yonhap
By Lee Kyung-min
Gold prices are breaking records, powered by expectations of a U.S. Federal Reserve rate cut before June, data showed Tuesday.
Anchoring the rally of the precious metal is the increase in reserves by global central banks, the inflow of investment capital, drawn-out geopolitical risks in the Middle East and Ukraine, uncertainties surrounding the U.S. presidential election and the deepening U.S.-China strategic rivalry.
Data from the Korea Exchange showed the per-gram price of gold came to 99,840 won ($73.88) Tuesday, up 1.39 percent from the previous session.
It was a new high set only one trading session after it ended at 98,470 won on Friday, up 2.79 percent from a day earlier.
The website for the Korea Gold Exchange was shut down briefly due to the high volume of traffic that was generated by a spike in investor demand seeking to buy the precious metal.
Global gold prices have also surged.
According to the Commodity Exchange, a futures and options market for gold, silver, copper and aluminum trading, spot gold prices were $2,265.53 per ounce on Monday (local time), up 1.32 percent from the previous session.
Hi Investment & Securities researcher Park Sang-hyun said the rise in gold prices will be underpinned by China bolstering its gold reserves in a move to diversify its foreign exchange reserves.
“China is seeking to lower its dependence on the U.S. currency amid the drawn-out conflict with the world’s largest economy,” he said.
“Last year, China’s gold reserves surged 7.2 million ounces compared to a year earlier. It further inched up by about 710,000 ounces in the first two months of this year. Gold then spiked about 10 percent last month.”
The researcher said caution is advised regarding the trend of sustained rapid price increases.
“Gold is registering an outstanding performance among major safe assets. The rise propelled by a combination of the Fed rate cut and disinflation is not a major cause for concern, but the possibility remains that it results from investor moves of hedging against inflation,” he said.
Meanwhile, global oil prices hit a five-month high, rattled by the exacerbated geopolitical conflict in the Middle East.
West Texas Intermediate futures for May delivery came to $83.71 per barrel, up 0.65 percent from the previous trading day. It was the highest since October of last year when it hit $85.54.
According to local media outlets, Tuesday, Israel allegedly struck the Iranian consulate in Syria’s capital Damascus, killing seven including two top commanders.
Iran’s Foreign Minister Hossein Amirabdollahian described the attack as a “violation of all international obligations and conventions” and blamed Israel.