Central Banks Step In to Support Gold as Prices Plummet

Gold prices have been on a downtrend despite the Middle East war, defying expectations that it would serve as a safe-haven asset. The Korea Gold Exchange reported that consumer purchase price for one don (3.75 grams) of pure gold stood at 866,000 won (approximately $606), trading 22.7% lower than the record high of 1,121,000 won set on January 29.

The decline in gold prices is attributed to concerns over war-driven inflation and tight monetary policy, which outweighs the impact of the war itself. Experts point to interest rates and a strong U.S. dollar as the core reasons for the current gold price correction.

Central banks around the world are engaging in a gold buying spree, with net gold purchases by global central banks in the second quarter amounting to 289 metric tons, a 62% increase from the same period last year and the largest second-quarter total on record. The Bank of Korea (BOK) also joined this trend, resuming physical gold purchases for the first time in 13 years.