Gold Funds and ETFs Shining Amid Soaring Gold Prices

Gold Price Rise Continues, Gold Funds and ETFs Also See Gains
Gold Funds Yield 15.06% Over Last 3 Months
Highest Among All Thematic Funds
US Presidential Election and Other Uncertainties Drive Gold Price Increase

As gold prices continue to break record highs day after day and maintain an upward trend, the returns on gold funds and exchange-traded funds (ETFs) are also soaring. The preference for safe-haven assets driven by the U.S. presidential election and Middle East geopolitical risks is pushing gold prices higher, and considering that uncertainties may persist even after the election, there is a forecast that the preference for gold investment could continue.

According to financial information provider FnGuide on the 2nd, the recent 3-month return of 12 gold funds with assets under management of over 1 billion KRW as of the 31st of last month recorded 15.06%, the highest return among 46 theme funds classified by FnGuide. Gold funds have been posting favorable returns throughout this year, with a year-to-date return reaching 29.93%. Along with the strong gold prices, capital inflows into gold funds have continued. Over the past three months, 16.7 billion KRW has flowed into gold funds.

Gold ETFs are also showing solid returns. ACE Gold Futures Leverage (Synthetic H) rose 56.68% from the beginning of the year to the end of last month, ACE KRX Gold Spot increased by 47.53%, KODEX Gold Futures (H) by 28.94%, and TIGER Gold Futures (H) by 28.80% respectively.

The strong returns of gold funds and ETFs are due to the sustained strength of gold prices this year, which have soared to record highs. The price of the nearest-month gold futures traded on the New York Commodity Exchange (COMEX) surpassed $2,800 per ounce for the first time ever on the 30th of last month. It took less than 10 trading days to rise from breaking $2,700 on the 17th of last month to surpassing the $2,800 level.

The ongoing Middle East geopolitical risks and the approaching U.S. presidential election have expanded uncertainties, strengthening the preference for safe-haven assets, which is interpreted as pushing gold prices higher. Lee Young-hoon, a researcher at Samsung Securities, analyzed, "The preference for safe-haven assets is the main factor driving gold price increases. As the U.S. presidential election approaches, uncertainties have grown, and especially the increased possibility of former President Donald Trump's election is further stimulating safe-haven demand. The continuation of conflicts in the Middle East is also causing safe-haven preference." He added, "The ongoing interest rate cut cycles in major countries such as Canada and the Eurozone are lowering the opportunity cost of investing in precious metals, and along with these factors, the gold-buying trend by emerging market central banks is continuing, so the precious metals' upward trend is expected to persist."

Although concerns about price burdens have been raised as gold prices have risen more than 30% this year, the preference for gold investment is expected to continue. Hwang Byung-jin, a researcher at NH Investment & Securities, said, "It is difficult to immediately predict the outcome of the U.S. presidential election, but the inflow of gold investment funds responding to political and geopolitical uncertainties will continue. As the Russia-Ukraine war and Middle East tensions prolong, uncertainties such as economic expectations for 2025, fiscal deficit concerns, and inflation re-ignition may increase after the U.S. election. Unless the U.S. Federal Reserve (Fed) signals a shift to tightening, the strong cycle of the precious metals sector under a monetary easing stance remains valid, and the gold price rally during this period will also continue," he forecasted.