Retail investors bought more gold despite biggest drop in 12 years

International gold plunged 5.5% in a single day on the 21st

Retail investors move to buy gold ETFs on dips

International gold prices, which had been on a prolonged rally, are plunging. The fall is due to growing expectations that U.S.-China trade tensions will ease and a flood of profit-taking after recent sharp rises. Individual investors are viewing the decline in gold prices as a buying opportunity and are increasing their investments.

According to Investing.com on the 27th, international gold spot prices fell 6.44% over the past week. They fell 5.5% in a single day on the 21st. It was the largest drop in 12 years since 2013. Gold spot prices traded on the Korea Exchange also fell 9.92% over the same period. The larger decline in domestic gold prices was due to the 'kimchi premium,' where domestic gold prices are formed higher than international prices.

Exchange-traded funds (ETFs) that track gold prices also fell across the board. Among domestically listed ETFs, the biggest loser over the past week was 'ACE KRX Gold Spot' (-10.37%). 'TIGER KRX Gold Spot' (-10.15%) followed. 'HANARO Global Gold Mining Companies' (-8.85%), which invests in gold mining firms, also saw a large decline.

The short-term crash in gold prices is driven by expectations that U.S.-China trade frictions will be resolved. With the U.S.-China summit scheduled for the 30th, expectations are growing that the two countries will reach an agreement. Park Sanghyun of iM Investment & Securities analyzed, "Gold prices have risen about 60% this year, increasing the desire for short-term profit-taking."

Individual investors are treating this fall in gold prices as a buying opportunity. Over the past week, individuals net bought KRW 140 billion worth of ACE KRX Gold Spot. This was the second-largest net buying amount among all ETFs during the period. Funds also flowed into TIGER KRX Gold Spot (KRW 42.7 billion) over the same period.

Market experts see a high likelihood that the upward trend in gold prices will continue for the time being. Park said, "Despite short-term adjustments, the long-term outlook for gold remains positive," adding, "Gold purchases by central banks, led by China, and a decline in real interest rates due to U.S. rate cuts will drive gold prices higher."

Reporter Na Suji suji@hankyung.com