Gold's unusual price swings leave investors at crossroads
Fed rate hike risks, AI-fueled stock rally keep gold in check
Gold products are displayed at the Korea Gold Exchange in Jongno District, Seoul, Jan. 22. Newsis
Gold, a traditional safe haven asset, has recently confounded investors with price movements that defy conventional market expectations, according to market watchers Thursday.
Prices fell during a period of escalating military tensions between the United States and Iran, only to rebound after the two sides reached a ceasefire agreement, challenging the long-held assumption that gold rises during wars and declines once conflicts subside.
Unusual movements in gold prices have fueled debate among investors over whether the recent correction signals further losses ahead or a buying opportunity.
According to the Korea Exchange, the domestic spot gold price rose for four consecutive trading sessions, climbing from 208,820 won ($137) per gram on Monday to 209,640 won on Tuesday, 209,700 won on Wednesday and 210,530 won on Thursday.
Gold prices had fallen below the 200,000 won mark, touching an intraday low of 196,780 won on June 11 as the Middle East conflict continued. They later rebounded after U.S. President Donald Trump announced on June 14 that an agreement had been reached with Iran to end the conflict.
Domestic gold prices surged to an all-time high of 269,810 won per gram on Jan. 29. Since then, prices have undergone a sharp correction, falling more than 20 percent from their peak.
A similar pattern has emerged in global markets. Gold futures on New York's Commodity Exchange fell to $4,114 per ounce on June 11 before rebounding to $4,354 on Tuesday.
Despite the rebound, prices remain about 20 percent below the peak of around $5,300 per ounce recorded earlier this year.
The price volatility is considered unusual given the geopolitical backdrop. Military hostilities involving the United States, Israel and Iran have escalated since late February, a development that would normally bolster demand for safe haven assets such as gold. But this time, the metal has moved in the opposite direction.
The correction in gold prices has also dampened enthusiasm for gold-related investments, including gold banking accounts and physical gold bars.
Data from the banking industry showed that the combined balance of gold banking accounts at KB Kookmin Bank, Shinhan Bank and Woori Bank fell to 1.99 trillion won as of Tuesday.
Gold banking enables investors to gain exposure to gold through bank accounts without owning the physical metal. It was the first time this year that total balances in the sector dropped below 2 trillion won.
Demand for physical gold has weakened as well. Gold bar sales at the nation's five major banks amounted to 20.4 billion won as of Tuesday, a steep decline from 90 billion won in January.
Market analysts believe the recent trend in gold prices is being driven more by shifting monetary policy expectations than by geopolitical tensions.
Oh Jae-young, an analyst at KB Securities, said that the rise in global oil prices has dampened hopes for near-term interest rate cuts by the U.S. Federal Reserve, even as geopolitical risks have intensified. As a non-yielding asset, gold becomes less attractive to investors in a high interest rate environment.
"In addition, investor capital has increasingly moved toward higher-risk assets, particularly semiconductor stocks, reducing the appeal of gold as an investment destination," Oh said.
Attention is now shifting to gold's trajectory following the ceasefire agreement.
A moderation in oil-driven inflation could ease concerns that interest rates will remain elevated for an extended period. However, if inflation stays elevated, uncertainty over the timing and pace of interest rate cuts by major central banks could persist.
Nevertheless, some analysts view gold's recent pullback as a buying opportunity, arguing that underlying demand for the precious metal remains robust and that its long-term fundamentals have not materially changed despite short-term price fluctuations.
"We have lowered our gold price forecast for the second and third quarters to $4,000-$4,700 per ounce, while maintaining our year-end target of $5,000," said Park Joo-ran, an analyst at Samsung Securities.
Park's outlook suggests that the recent correction could present a buying opportunity for investors, particularly when gold trades in the $4,000-$4,300 per ounce range.