2024-04-10 23:18:19
The concentration of safe assets accelerates due to rising prices.
China increases purchase holdings for 17 consecutive months… Gold futures soar 13% in 13 trading days
Bank of Korea suspends purchases for 11 years, causing controversy
Oil prices fall due to easing tensions in the Middle East
The price of gold is soaring through the roof. Central banks in emerging countries such as China and India are rushing to increase their gold holdings, leading the gold price rally.
On the other hand, the gold reserves of the Bank of Korea, which was criticized for failing to invest in gold purchases in the past, have remained the same for over 10 years. The gold price forecast released by the Bank of Korea last year was also wrong.
● Gold price reaches new high due to hoarding by central banks around the world
According to the New York Mercantile Exchange on the 8th (local time), the June gold futures price closed at $2,351.0 per ounce (31.1 g), breaking an all-time high. Gold futures prices closed higher 11 times out of the last 13 trading days, soaring by more than 13% during this period.
One of the factors that has recently fueled the price of gold is the active buying trend of central banks around the world. The People’s Bank of China, China’s central bank, announced that gold reserves in March were 72.74 million ounces, an increase of 160,000 ounces from the previous month. The People’s Bank of China has been purchasing gold for 17 consecutive months since November 2022 until last month, and the amount of gold purchased during this period alone amounted to 10.1 million ounces. In addition to China, countries such as India, Poland, and Turkic Republic are continuously increasing their gold reserves.
Central banks around the world purchase gold to avoid the risk of inflation. Dong-Hyeon Ahn, a professor of economics at Seoul National University, explained, “In a situation where liquidity is abundant, buying power is flowing into gold, a safe asset, due to concerns that the value of the currency may fall further if interest rates go down.”
Unlike global central banks that have started purchasing gold, the Bank of Korea has stopped purchasing gold for 11 years since 2013. As criticism arose over the Bank of Korea’s passive actions in relation to gold purchases, the Bank of Korea’s Foreign Investment Management Institute said in June last year, “In a situation where there is a potential for a global economic downturn and geopolitical risks, it is better to provide sufficient US dollar liquidity rather than expand gold holdings. “It is a better choice,” he said, adding, “With the price of gold already close to its previous high, we must also consider the uncertainty of its future upward potential.”
● The price of gold depends on the U.S. base interest rate
On the other hand, global investment banks (IBs) predict that gold prices could rise further if the U.S. Federal Reserve (Fed) lowers the base interest rate. According to Bloomberg, UBS recently raised its year-end gold price forecast by 11% to $2,500 per ounce. JP Morgan also raised the price to $2,500 per ounce, and Citigroup predicted that it could rise to $3,000.
Investors believe that the March U.S. Consumer Price Index (CPI), which will be announced on the 10th, and the prospect of a U.S. interest rate cut will have an impact on gold prices.
However, caution is also raised about investing in gold. The price of gold has risen sharply recently, and if the Federal Reserve’s interest rate cut is reversed, the price of gold may fall. Bob Parker, senior advisor to the International Capital Markets Association (ICMA), appeared on CNBC and said, “I think the upside potential for gold is minimal and it is very vulnerable to a downside.”
Meanwhile, international oil prices, which had been soaring due to heightened geopolitical tensions in the Middle East and supply concerns, turned downward after Israel announced that it would withdraw some of its troops from the Gaza Strip. According to Bloomberg, on this day, Brent crude oil for June delivery closed at $90.38 per barrel, down 0.79%, and West Texas Intermediate (WTI) crude oil for May delivery closed at $86.43, down 0.55%.
Reporter Lee Dong-hoon [email protected]
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2024-04-10 23:18:19