International Gold Prices Hit Record Highs... How Long Will the 'Safe Asset' Uptrend Last?

Amid growing concerns surrounding U.S. bonds and the dollar, gold is maintaining its solid position as a safe asset. However, domestic spot investors are advised to pay attention to the disparity with international prices.

On the 17th (local time) at the New York Mercantile Exchange, the June delivery gold futures price rose 0.39% to record $3,341.3 per troy ounce. After briefly falling below the $3,000 mark on the 7th, it surged 12.3% to hit a new all-time high. The recent announcement by the U.S. to raise tariffs on China from 125% to 245% has been cited as the cause of increased investor anxiety. If the conflict escalates into a full-blown trade war, the investment value of gold compared to U.S. bonds and the dollar is expected to increase further. Choi Ye-chan, a researcher at SangSangIn Securities, stated, "Gold is a positive asset in any scenario, including economic recession and inflation," adding, "Especially with China reducing its U.S. Treasury holdings and purchasing gold, a strategy of buying in installments is valid if the price falls below $3,000 again." Even if a dramatic resolution with China leads to a short-term adjustment in gold prices, securities firms predict there is room for prices to reach $3,600 by the end of the year.

However, it is advised to keep an eye on the 'Kimchi Premium' phenomenon in gold. The Kimchi Premium refers to the phenomenon where domestic gold prices exceed international prices. Domestic gold investments are often made through the Korea Exchange's KRX Gold Market. This is because it is easy to trade through securities firms and there are tax benefits. The KRX Gold Market is fundamentally based on spot investment. However, since the domestic gold futures market is not active, there are occasional instances where the disparity with international prices widens. In particular, in February, this disparity approached 20%, resulting in losses for many investors as it narrowed.

On this day, the spot gold price on the KRX Gold Market closed at 151,820 won per gram. Compared to the spot price on the London Bullion Market Association (LBMA), it is stable at 0.21%. Hong Seong-ki, a researcher at LS Securities, said, "In February, the unusual disparity was due to fears that the U.S. might impose item-specific tariffs on gold, disrupting spot supply and demand," but added, "The domestic gold market lacks the price adjustment function through futures trading, so investors need to keep an eye on trends."

Reporter Lee Si-eun