"The won could turn into scrap paper"…where investors are flocking as the FX rate surges again

Retail investors are placing big bets on gold exchange-traded funds (ETFs). As the won-dollar exchange rate has recently turned upward again and the value of the won has weakened, analyses suggest gold has become more attractive as an investment.

According to ETF Check on the 14th, retail investors net bought 92.3 billion won worth of 'ACE KRX Physical Gold' over the past month. They have purchased 29.6 billion won worth so far this year alone. As large sums from retail investors have poured in, the ETF’s net assets have topped 4 trillion won.

Gold prices have been soaring as geopolitical uncertainty has grown, including the Russia-Ukraine war and escalating tensions between the United States and Venezuela. On the New York Mercantile Exchange, February delivery gold futures closed the previous day at $4,624.14 per troy ounce, repeatedly setting new highs.

Analysts also say the renewed rise in the won-dollar exchange rate—after it had calmed following authorities’ market intervention late last year—is another factor boosting gold’s appeal. Gold is a representative safe-haven asset that tends to be favored when currency values become unstable. The won-dollar exchange rate surged from the start of the year and climbed into the 1,470 won range. It fell to 1,429.8 won through authorities’ intervention but has since returned to its prior level.

Experts projected that buying interest in gold will intensify amid a high exchange rate and a phase of U.S. benchmark rate cuts. Bank of America (BofA) said, "Expanded fiscal spending driven by U.S. President Donald Trump’s policies could lead to a decline in currency values," adding that gold prices could jump to $5,000 per troy ounce this year. Goldman Sachs also forecast, "An expansion in gold purchases by global central banks and a dovish tilt in monetary policy will drive gold prices higher," adding, "By the end of this year, gold could reach $4,900 per troy ounce."

Reporter Maeng Jin-gyu maeng@hankyung.com