Gold prices reached an all-time high earlier this year. On January 29, international gold futures peaked at $5,594.82 per ounce, rising nearly 28% in just one month. However, by the end of July, the price had plummeted to $4,100 per ounce. Recently, gold prices have begun to rise again, showing a clear upward trend since August. The likelihood of the U.S. raising interest rates has diminished, and the Bank of Korea has entered the gold investment market for the first time in 13 years, reigniting interest among individual investors. Nonetheless, caution remains, as factors such as rising U.S. long-term Treasury yields could again pull gold prices down, leaving investors uncertain about whether now is the right time to invest in gold.
Gold Prices Rebound in August
According to the financial investment industry on August 20, gold futures prices are rising again. After dropping to $3,992.10 on July 16, gold prices surged to $4,467.50 by August 12, marking an increase of approximately 11.9% within a month. Global investment bank UBS forecasts that gold prices will reach around $5,000 in the first half of next year.The recent surge in gold prices is linked to the reduced likelihood of further interest rate hikes by the U.S. Federal Reserve. Observations that the Fed is unlikely to raise rates at the upcoming Federal Open Market Committee (FOMC) meeting have bolstered the price of gold, a safe-haven asset. Gold does not yield interest or dividends, making it less attractive compared to deposits and bonds when interest rates are high. Conversely, when the trend of rate hikes eases or the value of the dollar weakens, investment funds tend to flow back into gold.
Investors Return to Gold Buying
As gold prices have turned upward, individual investors have resumed purchasing gold this month. According to the Korea Exchange, individual investors net bought 133 billion won worth of gold in the KRX gold market from August 1 to 14. After selling gold for three consecutive months in May (125 billion won), June (348 billion won), and July (51 billion won), they have shifted back to net buying this month.Demand for gold investment is also reviving in the banking sector. As of August 13, the gold banking balances at KB Kookmin, Shinhan, and Woori banks reached 1.8054 trillion won, a 4.5% increase from the end of July (1.7273 trillion won). Gold bar sales have also risen. During the same period, the average daily sales of gold bars at the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—amounted to approximately 1.73 billion won, a 20% increase from the previous month.
Will Gold Prices Continue to Rise or Fall?
Those considering late gold investments are in a quandary. It remains unclear whether gold prices will continue to rise or stabilize or fall. Some analysts caution against optimism for further increases. Heightened tensions in the Middle East have led to rising international oil prices, raising inflation concerns. If inflation worries cause the Federal Reserve to delay interest rate cuts or if high market interest rates persist, the relative attractiveness of gold as an investment may diminish. Additionally, long-term government bond yields in major countries have surged to their highest levels in decades, adding to the pressure.Expert opinions are divided. Hong Seong-ki, a researcher at LS Securities, stated, "If the U.S.-Iran conflict remains in a stalemate and the employment figures worsen in September, gold prices could rise sharply." Conversely, Jeong Hyun-jong of Korea Investment & Securities believes that if real interest rates in the U.S. begin to decline in the second half of this year and early next year, gold prices are likely to gradually increase. On the other hand, Oh Jae-young of KB Securities argues that as long as uncertainties surrounding the Iran conflict and concerns about the Fed's tightening coexist, it will be difficult to expect a sustained rise in gold prices.
Consider Actual Returns on Gold Investments
In addition to the potential rise in gold prices, investors should also consider the differences in actual returns based on investment methods. Various investment products, such as the KRX gold market, gold banking, and gold funds, come with different tax and transaction costs.The KRX gold market does not impose value-added tax on trading, but a 10% value-added tax and fees apply when physically withdrawing gold. Gold banking allows for easy buying and selling but incurs a 15.4% tax on capital gains. Gold bars also incur a 10% value-added tax at the purchase stage, making them costly for short-term speculative investments.
A financial investment industry official noted, "To gauge actual returns, one must consider not only gold prices but also exchange rates, taxes, and transaction and storage costs."
* This article has been translated by AI.
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