[Thousand-Character Column] Gold That Rose More Than Stocks

This year the global asset market can be summed up as an 'Everything rally.' Not only risk assets such as stocks and Bitcoin, but safe-haven assets like gold and silver are rising at a terrifying pace. What is noteworthy is the magnitude of the rise in safe-haven assets. So far this year gold has surged 52% and reached 4000 dollars per ounce. The representative global equity index, the U.S. S&P 500 index (15%), and even the KOSPI index, said to be the hottest in the world (48%), have lower rates of increase. The rise is so steep that the term 'safe-haven asset' starts to sound awkward.

It is also unusual for two assets of different natures to move in the same direction. Gold and stocks typically have an inverse correlation. Generally, stocks rise when the economy is good, and gold rises when it is bad. The reason common sense has been broken is complex. The vast liquidity injected after the COVID-19 pandemic has nowhere to go, and major countries are desperate not to let their currencies appreciate. It means the value of money has plunged. Sanae Takaichi, who is expected to be designated Japan's next prime minister and the LDP's new leader, opened her term calling for expanded fiscal spending and maintaining low interest rates. Those are all policies that induce yen weakness.

Even considering that the market is unsettled, the recent rise in gold prices seems excessive. Gold rising more than 50% in less than a year is the first time since 1979, when the oil shock brought global inflation. The Wall Street Journal pointed to the White House as the cause of the gold rally. Investors who view the U.S. economy pessimistically are rushing into gold to protect assets. Recently the Donald Trump administration has been waging tariff wars with countries around the world, including South Korea. Also, for the first time in seven years, the federal government has been shut down (a temporary work stoppage), leaving government functions paralyzed.

In the market the view that gold prices will rise further is prevailing. Goldman Sachs recently raised its year-end gold price forecast from 4300 dollars per ounce to 4900 dollars per ounce. It is a message that the uneasy situation, where one does not know what might happen, will continue for the time being. While the rise of gold, a 'fear asset,' is welcome in one sense, it is not entirely welcome.

Hyung-seok Song, editorial writer click@hankyung.com