Gold prices have fallen about 20% from their year-to-date high as major stock markets in Korea, the United States and elsewhere continue to hit record highs, intensifying the shift toward risk assets. Inflation concerns from surging oil prices, a strong dollar and the equity rally have combined to weaken gold's short-term investment appeal.
According to the Korea Exchange on Thursday, domestic gold on the KRX Gold Market traded at 217,050 won per gram, about 20% below the all-time high of 269,810 won reached on January 29. International gold prices also stood at $4,568.50 per troy ounce, down 14.68% from the year's high of $5,354.80.
High oil prices and a strong dollar have been the main variables weighing on gold. Brent crude futures for July delivery closed at $109.87 on the ICE Futures Europe exchange in London on the same day. Rising oil prices have fueled inflation concerns, dampening expectations for interest rate cuts by the U.S. Federal Reserve.
Weaker rate-cut expectations can drive up Treasury yields and strengthen the dollar, both of which weigh on gold. The U.S. Dollar Index, which measures the greenback against six major currencies, stood at 98.07. Because gold pays no interest, higher rates raise the opportunity cost of holding it.
Notably, the S&P 500 (7,259.22), Nasdaq (25,326.13), Taiwan's Taiex (40,705.14) and Japan's Nikkei (59,513.12 yen) continue to mark record highs. Despite geopolitical risks, major artificial intelligence (AI) companies have posted strong earnings one after another, reducing the incentive for funds to flow into gold.
Domestic gold-related exchange-traded funds (ETFs) have been directly affected. According to ETF Check, the one-month return of ACE KRX Gold Spot stood at -4.62% as of Thursday, while TIGER KRX Gold Spot returned -4.05%. Among 27 commodity-type ETFs, they ranked 27th and 26th, respectively. SOL International Gold Covered Call Active and SOL International Gold posted returns of -2.95% and -3.39%, respectively.
Still, some analysts say medium- to long-term demand remains intact, as major central banks continue to buy gold as part of efforts to diversify their foreign exchange reserves.
