Gold prices, which had bottomed out and begun to rise, are slipping again. International gold futures prices have fallen 21% from their peak and have dropped 4% over the past month, standing at around $4,200 per ounce. The returns of related ETFs (Exchange-Traded Funds) are also in negative territory. However, as forecasts suggest that gold prices will rise again within the year, funds continue to steadily flow into the ETFs.
The decline in gold prices is attributed to persistently high interest rates and expectations that the Federal Reserve System (Federal Reserve) will raise its base rate once more within the year. Gold is a representative safe-haven asset and an inflation hedge, typically showing strength during interest rate cut cycles and weakness during rate hike cycles.
Returns on gold-related ETFs are also in a negative streak. According to KOSCOM ETF Check, as of the 12th, the one-month return (based on reinvestment of distributions) for 'HANARO Global Gold Mining Companies' was -8.63%. ACE Gold Futures Leveraged (Synthetic H) (return -8.55%), ACE KRX Gold Spot (-5.19%), TIGER KRX Gold Spot (-4.72%), and KODEX Gold ETN (-4.72%) are also in the negative.
Despite the sluggish performance of gold ETFs, funds are flowing into them. As of the 8th, 'ACE KRX Gold Spot' saw a net inflow of 10.3 billion won over the past month. Funds also poured into TIGER KRX Gold Spot (inflow of 3.7 billion won), KODEX Gold ETN (1.6 billion won), TIGER Gold Futures (H) (3.8 billion won), and SOL International Gold (2.4 billion won).
The inflow of funds is driven by the prevailing view that gold prices will rise again. Experts in the financial investment industry first believe that gold prices have secured downside rigidity at the $4,000-per-ounce level.
Hwang Byung-jin, a researcher at NH Investment & Securities, said, "The massive fiscal deficit of the U.S. federal government, policy uncertainty, and the trend of global central banks expanding their gold reserves support the downside rigidity of gold prices." The scale of net gold purchases by central banks increased from 57 tons in the first quarter to 289 tons in the second quarter. The Bank of Korea also joined the ranks of central bank gold buyers by announcing its intention to purchase export-oriented spot gold produced by refiners as Busan material for the first time in 13 years.
Baek Jae-seung, a researcher at Samsung Securities, predicted, "Generally, gold prices tend to rebound three months after a Federal Reserve interest rate hike," adding, "If the Iran war also ends, the decline in energy prices will be reflected in price indices, and gold prices will trace a gradual rebound trajectory starting from year-end."
Views on the timing of the rebound vary among securities firms. NH Investment & Securities forecasted that gold futures prices will recover the $5,000 line within the year. Samsung Securities predicted that gold prices will move between $3,900 and $4,600 in the fourth quarter of this year and rise to $4,900 within the next 12 months.
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