"Today is the cheapest"…Lump-sum money floods into gold prices that jump overnight

Retail investors' lump-sum money despite gold prices breaking through the ceiling

Safe-asset demand strengthens as rate cuts and a shutdown begin

Over 1,100,000,000,000 won flowed into gold funds in a year

"Overheating or long-term strength?" Diverging forecasts

Gold investment funds are rapidly absorbing retail investors' lump sums. This is interpreted as the result of increased safe-asset preference as expectations of a U.S. shutdown (temporary suspension of operations) and rate cuts overlap.

According to financial information firm FnGuide on the 4th, the average one-month return of the 13 domestically established gold funds as of the 1st was 23.14%. It is the highest performance among the 48 thematic funds classified by FnGuide. The average increase of these gold funds over the past year reached 60.34%. This is also the number-one return among all thematic funds. The global gold price reaching an all-time high has been directly reflected in domestic fund returns.

Capital inflows are also steep. Over the past month, assets under management for gold funds increased by 393,300,000,000 won. Even amid a slump across the public offering fund market, investment capital is concentrating in gold funds (including ETFs). Over the past year, as much as 1,110,600,000,000 won flowed in.

In particular, retail investor funds are pouring in. For the ETFs tracking the domestic gold spot index, 'ACE KRX Gold Spot' and 'TIGER KRX Gold Spot', individuals net bought 243,400,000,000 won and 184,100,000,000 won respectively over the past month.

Global gold prices have been soaring day after day. The U.S. government's debt burden, inflation concerns, and skepticism about the dollar's status as the anchor currency have steadily driven up gold prices. Additionally, as the federal government entered a shutdown and the dollar weakened further, buying interest in gold strengthened even more.

At the New York Mercantile Exchange on the 1st (local time), the December delivery gold futures settlement price closed at 3,897.5 dollars per ounce, marking another record closing high. The spot gold price also intraday rose to 3,895.09 dollars per ounce, setting an all-time high.

A steeper rise is appearing in the domestic gold market. According to the Korea Exchange, on the previous day in the KRX gold market, the per-gram price of the 1 kg gold item was 187,300 won at the close. On the same day it traded 7.47% higher than the international gold price (174,280 won). Industry even evaluated that "the 'Kimchi premium' phenomenon that attached to virtual assets in the past has moved to gold."

As the so-called 'Kimchi premium' phenomenon—where domestic gold prices exceed international prices—intensified, the Korea Exchange also issued a warning.

The Korea Exchange explained, "Due to the nature of the KRX gold market, which trades based on physical investment-grade gold (gold bars with a purity of 99.5% or higher), a price gap occurred as investment demand temporarily exceeded the supply of physical investment-grade gold." The exchange urged investors to be cautious, saying, "There is a high possibility of rapid price changes during the long holiday period due to global market conditions."

Meanwhile, experts offered divergent views on future gold price prospects.

Those who believe the gold price uptrend will not be halted in the short term cite inflation-hedge demand and aggressive purchases by emerging market central banks as the basis.

Choi Ye-chan, a researcher at Sangsangin Securities, analyzed, "Since the second half of 2022, gold prices have risen steadily without major corrections," adding, "In particular, as it coincided with the time when emerging market central banks such as China began to actively purchase, the downside has become solid." He went on, "As the U.S. central bank (Fed) has begun cutting rates, the appeal of gold as an interest-free asset will increase further," and "this bull market could continue until the end of next year."

On the other hand, there are many overheating arguments about domestic and international gold prices. Kim Yu-min, a researcher at Hanwha Investment & Securities, pointed out, "The recent gold price rally has been driven more by inflows of ETF funds from individuals and institutions and the recovery of over-the-counter trading than by central banks' buying," and said, "The rise in gold prices relative to M2 (a global money supply indicator) is excessive."

In fact, compared with the end of 2023, M2 increased by 7% while gold prices rose by 77%. Researcher Kim warned of the possibility of a price correction, saying, "Gold is a non-income-generating asset, so liquidity is key, but now it has entered a period of short-term overreaction."

Korea Investment Trust Management, which operates gold spot ETFs, appealed to investors on the 30th. The company explained, "Due to the recent increase in domestic gold investment demand, a price gap between international and domestic gold prices has emerged," adding, "Since our gold spot ETFs are managed based on domestic gold prices, they may be affected by this difference."

Min-kyung Shin Hankyung.com reporter radio@hankyung.com