Gold prices soar to record highs on anticipated US interest rate cuts

Gold bars are displayed at the Korea Gold Exchange in central Seoul, Tuesday. Yonhap

The recent rise of gold prices to new record highs is attracting substantial interest from investors both domestically and internationally.

Analysts predict that the upward trend for gold is likely to continue for the time being, boosted by the weakening dollar in addition to growing expectations that the U.S. Federal Reserve will start cutting rates in September.

The uncertainty surrounding the U.S. presidential election in November, along with hostilities in the Middle East and the prolonged Russia-Ukraine war, are also seen as factors driving up gold prices.

Typically, when political or economic uncertainty increases, the price of gold surges as it is highlighted as a safe-haven asset.

Ever since surpassing $2,500 per ounce for the first time in history on Aug. 12, international gold prices have been continuing the upward trend. So far this year, international gold prices have risen by around 23 percent, with forecasts indicating that the prices could approach $2,700 by the end of the year. Some analysts even suggest that prices could reach up to $3,000 next year.

“We could see gold moving toward $2,600 or $2,700 near the end of the year," Amelia Xiao Fu, head of commodity markets at Bank of China International, was quoted as saying by Reuters. “We have the U.S. elections, there’s still a lot of uncertainty.”

Aakash Doshi, head of commodities, North America at Citi Research, also said that gold could reach $3,000 per ounce by mid-2025.

With the rise in international gold prices, gold prices in the local market have also surged. According to Korea Gold Exchange, Monday, it costs 452,000 won, including tax, to purchase 3.75 grams of gold. It is around 30 percent rise from a year ago.

The upward trend in gold prices is drawing investors to gold-related exchange-traded funds (ETFs) due to their strong performance.

Korea Investment Management’s physical gold ETF has achieved a 0.74 percent return over the past month as of Wednesday, with total investments reaching 41.5 billion won ($31 million).

Similarly, Samsung Asset Management’s gold futures ETF displayed a 3.71 percent return over the same period, attracting investments totaling 6.1 billion won.

“Growing expectations of interest rate cuts by the Fed, coupled with a fall in government bond rates and a weakening dollar, are fueling the gold price rally,” said Park Sang-hyun, an analyst at iM Securities. “It is highly likely that the strong gold price trend will continue for the time being.”