[Practical Asset Management] Will the "Everything Rally" Return?... Gold, Silver, and Copper Investment Strategies for This Year

Precious Metals Rally Last Year on Dollar Weakness and Expanding Liquidity
Rate Cut Expectations and Central Bank Hedging Demand Support Prices
Caution Over Possible Shift in Leading Assets From the Second Half

Investors are closely watching whether the strong upward trend in gold, silver, and copper prices will continue this year. As short-term volatility is expected to increase around the end of the year and the beginning of the next, experts emphasize that it is important to make strategic decisions regarding future investments in gold, silver, and copper.

According to the investment banking (IB) industry on January 7, last year's investment market experienced an "Everything Rally," where both the stock and precious metals markets soared simultaneously due to a combination of increased global liquidity, a weaker dollar, and heightened geopolitical uncertainty. In the commodities market, the precious metals sector posted a 68.67% annual increase. Gold, silver, and copper prices rose by 64.4%, 141.4%, and 41.7%, respectively (based on the London Metal Exchange). In addition, rare metals such as platinum and palladium surged by 127.6% and 81.5%, respectively, outperforming other asset classes.

Hwang Byungjin, a researcher at NH Investment & Securities, explained, "Last year, the commodities market was led by gains in precious and industrial metals, while energy and agricultural products underperformed. We are witnessing an Everything Rally, where the distinction between safe-haven and risk assets has become blurred."

Gold: Spot ETF Investment Possible... Watch Out for the Kimchi Premium

The activation of exchange-traded funds (ETFs) has not only increased accessibility for precious metals investors but also facilitated large-scale inflows of investment capital. In particular, the ACE KRX Gold Spot ETF, with net assets of 3.8 trillion won, attracted approximately 2.378 trillion won in inflows over the past year. The TIGER KRX Gold Spot ETF, with assets of 1.05 trillion won, saw about 862 billion won in inflows during the same period.

ETF products such as ACE KRX Gold Spot and TIGER KRX Gold Spot directly track domestic gold spot prices and have relatively low management fees. However, investors should be aware of the so-called "Kimchi Premium" (price gap), where Korean gold prices trade at a premium to international prices. Even during a gold price correction in October last year, the premium, which had approached 20%, fell to 0-1%, resulting in relatively larger losses for domestic investors.

If you want to avoid volatility caused by the price gap, you can consider products that track international gold spot or gold futures indices. KODEX Gold Futures (H) and TIGER Gold Futures (H) from Mirae Asset Management track international gold futures prices, while KODEX Gold Active and SOL International Gold track international gold spot prices. For active ETFs, returns may vary depending on the performance of the management strategy that adjusts the ratio between spot and futures, rather than the gold price itself.

There are no products that directly track spot prices for silver and copper. Investors can indirectly invest in futures-based ETFs such as KODEX Silver Futures (H), TIGER Silver Futures (H), KODEX Copper Futures (H), and TIGER Copper Futures (H). However, structural factors such as rollover (carrying forward futures contracts) costs can impact the returns of futures-based products.

"Drop Triggered by CME Margin Hikes... Rally Still Valid for Now"

The key point to watch in the commodities market going forward is whether gold and silver can reach $5,000 and $100 per ounce, respectively, and whether copper can hit $15,000 per ton. Last week, precious metals prices in the commodities market dropped sharply by 5.3%. This was due to increased price volatility following two rounds of margin hikes for gold, silver, copper, and platinum by the Chicago Mercantile Exchange (CME) last year. On January 6 at the New York Mercantile Exchange, gold futures traded at $4,454.20 per ounce and silver futures at $76.18 per ounce.

Experts assess that the bullish trend for gold, silver, and copper is likely to continue at least through the first half of this year. Oh Jaeyoung, a researcher at KB Securities, stated, "We expect volatility to remain elevated for some time due to the CME's margin hikes and fatigue from the recent sharp rise in precious metals prices. However, we maintain our outlook for further gold price increases within the year."

Researcher Hwang added, "As long as the US Federal Reserve maintains a rate-cutting stance and the dollar remains weak, the structural factors supporting higher gold, silver, and copper prices remain intact. Until the first half of the year, investors can consider a strategy that focuses on gold while also including silver and copper."

Choi Jinyoung, a researcher at Daishin Securities, analyzed, "The recent rise in gold prices is the result of central banks around the world increasing their hedging demand due to the Federal Reserve's policy rate cuts and concerns over the credibility of long-term bonds. The possibility of more than two US policy rate cuts going forward creates an attractive environment for gold prices." He continued, "The Fed has ended quantitative tightening (QT) and started purchasing Treasury bonds, and the supplementary leverage ratio (SLR) regulation, which had restricted investment banks, is also being eased. Furthermore, there is speculation that the next Fed chair, to be appointed by US President Donald Trump, could be someone favorable to rate cuts."

Caution Urged for Second-Half Price Trends... "Managing Volatility Is Crucial"

There are also cautious opinions about whether the rally will continue through the end of the year. Researcher Choi pointed out, "Policy rate cuts have already passed the critical threshold, and looking at the number of rate cuts by central banks around the world, it is difficult to expect the same pace as in 2023-2025." He added, "This year, the hedging demand from central banks will not match last year's levels, and the gains in silver and copper, which follow liquidity, may also be limited compared to last year."

There is also the possibility that energy could take the lead in commodity price increases starting in the second half of the year. Researcher Choi explained, "The energy sector, consisting of oil and natural gas, lags behind gold prices by 18 to 20 months as a liquidity indicator. Considering that non-US-centric liquidity has been expanding since early last year, the fourth quarter of this year could reflect this. This would be a factor that limits monetary policy and slows the pace of gold price increases."

He added, "Gold will likely remain the leading asset until the first half or at least the third quarter, but investors should be aware of the possibility that the leading asset could change in the second half as the lagged effects of liquidity are reflected."