Gold Prices Sparkle as Strong Dollar Pauses... Gold ETF Up 13% in 3 Months

Dollar Value Falls and Recession Concerns Grow
Safe-Haven Asset Preference Rises, Gold Prices Increase

[Asia Economy Reporter Kwon Jaehee] Gold, a representative safe-haven asset, is shining. This is attributed to the recent weakening of the 'King Dollar (ultra-strong dollar)' trend and increased concerns about an economic recession, which have raised the preference for safe-haven assets. Accordingly, gold investment products, including gold exchange-traded funds (ETFs), are also gaining attention, with their growth rates reaching double digits.

According to the Korea Exchange, the recent three-month growth rate of major gold ETF products listed domestically has recorded about 10%. The highest growth rate is seen in the 'ACE Gold Futures Leverage (Synthetic H)'. This ETF rose 7.50% just this month (January 2?9). Its growth rate over the recent three months (October 7, 2022 ? January 9, 2023) reached 13.68%. 'KODEX Gold Futures (H)' also recorded a 3.81% increase this month and an 8.02% rise over the past three months. 'TIGER Gold Futures (H)' showed growth rates of 3.83% and 8.06%, respectively.

The reason gold ETFs, a representative 'Gold Tech (Gold + Investment Tech)' method, have recorded such growth rates is that while the dollar's upward trend has stalled, international gold prices are soaring. Gold is an asset denominated in US dollars, and gold and the dollar generally show a negative correlation. On the 9th, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1,243.5 won. This was 25.1 won lower than the previous trading day, marking the first time in about seven months that the exchange rate closed in the 1,240 won range since June 3 last year (closing price 1,242.7 won).

International gold prices are rising day by day. On the same day, the February delivery gold futures price on the New York Commodity Exchange (COMEX) was $1,869.70 per ounce, the highest level in the past six months.

Shim Subin, a researcher at Kiwoom Securities, analyzed, "Due to global recession concerns, the preference for safe-haven assets is increasing, leading to a continued rise in gold prices. Although the minutes of the December Federal Open Market Committee (FOMC) reaffirmed the Federal Reserve's tightening stance, expectations that the tightening intensity will be milder than before are also cited as a factor driving gold prices up." Kang Songcheol, a researcher at Eugene Investment & Securities, also explained, "The rise in gold prices reflects that the market is already considering economic sluggishness or the possibility of a recession rather than inflation. When the economy is sluggish and interest rates fall, preference for gold increases."