Gold prices, which faced a steep decline at the start of the year, have been adjusting for nine months due to high interest rates. Domestic investors are particularly impacted, suffering from both price drops and foreign exchange losses as the won strengthens. Despite these challenges, experts highlight that gold remains a key diversified investment asset, with long-term appeal intact.
The sharp decline in gold prices is primarily driven by rising interest rates, which pressure the non-interest-bearing asset. Spot gold prices peaked at $5,602 per troy ounce on January 29 but dropped to $4,170, a roughly 26% decrease. Hwang Byung-jin of NH Investment & Securities noted that the yield on two-year U.S. Treasury bonds nearing 5% has clearly burdened gold prices.
Domestic investors are also facing currency losses, with gold bars falling about 33% from their January high. Globally, central banks continue to buy gold, viewing it as a hedge against fiscal uncertainty. Experts suggest that gold prices have excessively reflected the possibility of further U.S. Federal Reserve rate hikes, which may not materialize as expected.
Looking ahead, analysts predict a rebound in gold prices if the Fed raises rates fewer times than anticipated. Huh Jae-hwan of Eugene Investment & Securities forecasts gold prices to stabilize around $4,000 per troy ounce, while Hwang Byung-jin and Huh predict year-end targets of $5,000 and $4,400, respectively. UBS also remains optimistic, forecasting $4,600 by year-end and $5,400 by September 2025.