In recent months, fluctuating gold prices have prompted individual investors to increase their purchases of gold investment exchange-traded funds (ETFs), despite the metal’s price decline. Individuals have made net purchases totaling nearly 900 million won, betting on a future rise in gold prices.
According to data from the Korea Exchange, between October 25 and December 24, individual investors net bought 79.4 billion won worth of the ‘ACE KRX Gold Spot’ ETF from Korea Investment Trust Management. They also invested a combined 7 billion won in other gold-related ETFs, including the ‘TIGER Gold Futures (H)’ from Mirae Asset Global Investments, which saw a net inflow of 5.7 billion won, and the ‘KODEX Gold Futures (H)’ and ‘ACE Gold Futures Leverage (Synthetic H)’ from Samsung Asset Management, which garnered 1.1 billion won and 250 million won, respectively.
Despite these inflows, the price of gold has faced downward pressure in recent months. From October 23 to December 24, gold prices fell 4.04%, from 129,100 won to 123,890 won per gram, with some recovery observed recently. However, prices remain well below their peak of 130,500 won per gram in late October. A sharp dip occurred in early November when the U.S. dollar strengthened following Donald Trump’s presidential election, alongside rising government bond interest rates, which sent gold prices as low as 110,000 won per gram.
The volatility continued on December 18 following a hawkish announcement by the Federal Open Market Committee (FOMC). The U.S. Federal Reserve revised its earlier stance on interest rate cuts, signaling only two smaller cuts in the coming year, rather than the previously expected four. This shift added uncertainty to the market, contributing to a drop in gold-related ETFs. During the period, the ‘ACE Gold Futures Leverage (Synthetic H)’ ETF fell by 10.54%, while the ‘ACE KRX Gold Spot,’ ‘TIGER Gold Futures (H),’ and ‘KODEX Gold Futures (H)’ ETFs saw decreases of 4.21%, 4.86%, and 4.82%, respectively.
Despite the decline in prices, individual investors are continuing to purchase gold ETFs, confident that gold will appreciate in the long term. Analysts from NH Investment & Securities have expressed optimism about the future performance of gold, suggesting that as long as U.S. interest rates remain stable or are reduced further, gold’s value is likely to increase in 2024. The firm has recommended an ‘increase in allocation’ to gold investments.
Hwang Byeong-jin, a researcher at NH Investment & Securities, noted, “Short-term fluctuations in gold prices should be viewed as a buying opportunity from a long-term perspective,” adding, “As long as the Federal Reserve’s policy does not shift towards tightening, gold prices are expected to enter a bullish cycle.”
While a strong dollar typically puts downward pressure on gold prices, some experts predict that geopolitical tensions and economic uncertainties will continue to support the metal’s value. Goldman Sachs has forecast that gold prices could reach $3,000 per ounce by the end of 2025, an 11% increase from the current price of approximately $2,600 per ounce. The investment bank suggests that ongoing geopolitical tensions, such as the Russia-Ukraine war and Middle Eastern conflicts, as well as concerns over U.S. tariffs, could make gold an increasingly attractive asset.
As global uncertainties persist, investors appear to be betting on gold as a long-term hedge, with many eyeing further gains in the year ahead.
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