[Setting Sun King Dollar] ① Amid Sharp Dollar Decline... Gold Shines

Gold account balance rises 3.3% in about 20 days
Foreign currency deposit balances at 5 major banks turn to decline

[Asia Economy Reporters Yu Je-hoon and Boo Ae-ri] Gold, the representative safe-haven asset, is shining again after a long time. This comes as the era of the 'King Dollar,' signifying the ultra-strong US dollar, is coming to an end.

According to the financial sector on the 30th, as of the 25th, the balance of gold banking (gold accounts) at three major commercial banks (KB Kookmin, Shinhan, and Woori) was recorded at 519.7 billion KRW. This is a 3.3% increase compared to the end of the previous month. In just about 20 days, a large sum of 16.6 billion KRW has flowed in.

The increase in gold banking balances at commercial banks marks a turnaround after about six months. In February last year, the gold banking balance reached 695 billion KRW but decreased to 612.3 billion KRW by May. Since then, it slightly rebounded to 623.7 billion KRW in June and continued to decline for about half a year until December last year (503.1 billion KRW).

The rise in gold banking balances is due to the increase in international gold prices. According to Shinhan Bank, as of the 26th, the international gold price was recorded at 1,935.19 USD per troy ounce (T.oz = approximately 31.10g). Compared to the early November last year when it dropped to 1,619.90 USD, it has risen about 19.5% in three months.

The driving force behind the gold price increase is the 'retreat' of the US dollar, which had surged sharply throughout last year. According to the Bank of Korea, the KRW-USD exchange rate surpassed 1,430 KRW between September and October last year due to the US Federal Reserve's tightening stance. There were even forecasts that the exchange rate could surge to the 1,600 KRW level, leading investors expecting foreign exchange gains to continue buying US dollars.

However, since the end of last year, key US market indicators such as the Consumer Price Index (CPI) and expected inflation have improved, causing the US dollar to plunge. The 1,400 KRW level broke down in early November last year, and by late December, it fell to the 1,300 KRW level, dropping further to 1,231.3 KRW as of the 27th. Especially with expectations that the Federal Reserve may soon end interest rate hikes, the retreat of the dollar is accelerating. Some in the financial sector predict that the KRW-USD exchange rate could fall to the 1,100 KRW level within this year.

Reflecting this situation, foreign currency deposit balances at major commercial banks are rapidly decreasing. As of the 25th, the dollar deposit balance at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) was recorded at 69.8 billion USD. This is a 6.7% decrease compared to the end of the previous month (74.8 billion USD).

The asset price increase following the retreat of the King Dollar phenomenon is not limited to gold alone. Bitcoin, known as the base currency of the virtual asset market, was traded at 20.85 million KRW per 1 BTC at the end of last year but rose to 28.34 million KRW as of the 27th, an increase of 34.9% in less than a month. Virtual assets are also classified as assets inversely correlated with the dollar, like gold. Industry insiders expect Bitcoin prices to continue their sharp rise this year.

Baek Seok-hyun, an economist at Shinhan Bank, said, "Last year, the term 'King Dollar' was used as the dollar's dominance continued throughout the year, and most assets such as gold and virtual assets showed little progress," adding, "It is judged that prices, which had fallen, are recovering as the dollar's strength subsides."