Gold prices rising amid inflation concerns

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By Lee Kyung-min

Gold prices are rebounding on the back of a combined decline in treasury yields and the value of the U.S. dollar, coupled with investment sentiment seeking to hedge against inflation, a growing concern amid the global economy showing signs of recovery from the COVID-19 pandemic.

The case for inflation has strengthened as ample liquidity in the market pumped in by governments around the world to cope with the health crisis led to a fall in the dollar's value, with pent-up demand for consumption highly likely to recover.

Gold bears no yield, a reason why its price sinks if interest rates rise. The price of the yellow metal, a safe-haven asset alongside the dollar, also falls when the global reserve currency appreciates.

Data from the Korea Exchange (KRX) showed the price of 1 gram of gold rose to 68,200 won ($60), Wednesday, up 0.56 percent from the previous day.

This is nearly a 10 percent increase from an annual low of 62,300 won March 5, and is inching upwards to the 2021 peak of 69,230 won seen Jan.8.

The price of gold continued to drop from the end of last year to early this year as many investors maintained risk-on sentiment, as indicated by the continued inflow of funds into the stock market.

International gold and silver prices also rose. U.S. spot gold was $1,868.57 per ounce, Tuesday (local time) after hitting its highest since Jan. 29. U.S. gold futures settled at $1,868, largely unchanged from a day earlier. Silver rose to $28.26 per ounce.

The future course of the metals' prices will be determined by whether the U.S. Federal Reserve touches on the subject of inflation. The minutes of the Fed's last policy meeting are expected to be made public Wednesday (local time).

Inflation is emerging as a major concern in Korea as well, with Monetary Policy Board members of the central bank stressing “financial stability,” an implied way of placing greater weight on a key interest rate hike.

Meanwhile, cryptocurrency, often referred to as digital gold and what some describe as an alternative investment to gold, is on the decline, continuing its extreme price volatility.

One bitcoin traded for 55 million won, Tuesday, after hitting a high of over 80 million won in April.