It is an inflation hedge and last resort. It is an expression that follows without exception when discussing the value of gold as an investment asset. It is for this reason that interest in ‘Gold Tech’ is growing as the financial market is unstable and uncertainty regarding the economy increases.
The recent surge in gold prices is not unrelated to this context. Last month, as consumer prices in developed countries such as the United States and the United Kingdom soared to the highest level in 30 to 40 years, the global market is unable to shake off fears of inflation. Geopolitical concerns over the possibility of Russia’s invasion of Ukraine are also a factor that stimulates the preference for safe assets, raising gold prices. While the KOSPI fell 18% over the past half year, the domestic gold price quietly rose 8%. Gold futures rose 1.9% on the New York Mercantile Exchange last week, the biggest gain in regarding two months. In a letter to investors on Friday, Goldman Sachs recommended adding gold to its portfolio, saying, “It is rare for gold prices to show such strength.”
So, is now the right time to invest in gold? The general consensus among experts is that there is no need to rush right now, although interest in gold tech is maintained. Experts emphasized that “investment in gold should be approached from a long-term diversified investment perspective rather than a means to earn active investment returns.”
Graphic = Reporter Shin Taek-soo
Gold prices rise once more in Ukraine war
According to the Korea Gold Exchange, the international gold price, which dropped to $1732.9 per troy ounce (31.1g) at the end of September last year, rose to $1876.9 per troy ounce on the 15th of this month. The domestic gold price also recorded 312,500 won per 3.75 g as of the same day, up more than 17% in one year from the end of March last year (266,500 won), which reached a trough. This is the highest point since August 2020. Kim Hyun-mo, CEO of the Korea Gold Exchange, said, “As interest in gold has increased, the sales volume of gold bars distributed through commercial banks in January this year reached 85 kg, a 160% increase from the previous year.”
Gold demand is not expected to subside for the time being. In the short term, there is also a forecast that the support level will be maintained at $1,800 per troy ounce. GlobalX analyst Lohan Ready said, “As long as the risks associated with the Russian invasion of Ukraine continue, demand for gold, a safe haven asset, will continue to rise.”
Gold bar, KRX, bankbook… What are the advantages?
There are three main ways that individuals invest in gold: △ real gold transaction △ transaction through the Korea Exchange (KRX) gold market △ commercial bank gold account △ gold trust product △ gold fund. Although real gold trading, such as gold bars, is the most intuitive, it is more suitable for long-term holding purposes than arbitrage investments. Since real gold is treated as a commodity, 10% of VAT must be paid when purchasing gold bars, and a fee (regarding 5%) is also deducted from the place of purchase. In terms of return on investment, it means that you start investing at a level of -15%.
If you want to invest in the short term, there is a way through the KRX gold market. By opening a gold spot account at a securities company, you can buy and sell gold in 1g units in real time, just like stocks. When only trading on the stock exchange, the fee is as low as 0.3% (brokerage company online fee). It is also attractive that there are no taxes such as transfer and dividend income tax on sales profits. However, if you want to withdraw in real form, you have to pay 10% of the price at that time, and there is a cost of withdrawal itself, so it is not desirable for the purpose of holding the real thing.
Commercial banks can use gold passbooks and trusts. When you put money in a bank account like a foreign currency deposit, the balance automatically moves according to the international gold price and exchange rate. It can be traded in units of 0.01g, allowing for a small investment. A 1% transaction fee and 15.4% dividend income tax on trading profits are levied, but the advantage is a simple investment method.
“We need to approach it from a long-term investment perspective”
Most experts emphasize that gold investment should be approached for the purpose of portfolio diversification and long-term investment rather than obtaining short-term gains. Kim Jeong-yeol, an expert at Nonghyup Bank’s NHAll100 Advisory Center, said, “Gold is not an asset suitable for buying and selling in pursuit of trading profit from a short-term perspective. Since the price has risen a lot, it is recommended to buy in installments whenever the market price falls.”
There are many forecasts that it will be difficult for the gold price to continue to rise in a trend. Song In, head of PB at Shinhan PWM Privilege Seoul Center, said, “As interest rates have recently risen once more and the central bank has begun tapering (reducing bond purchases), there is a possibility that gold prices may fall if the dollar rises. When the market stabilizes, it will not be too late to buy gold.”
Reporter Bin Nan-sae binthere@hankyung.com