Gold prices rise as safe havens sought

Gold prices in South Korea have climbed following the death of North Korean leader Kim Jong-il as concerns over heightened geopolitical uncertainties and a strengthening greenback have prompted investors to stock up on safe-haven assets, data showed yesterday.

The retail price of 1 don of pure gold here stood at 238,000 won ($205.99) as of Tuesday, marking the biggest rise since it hit 241,000 won on Dec. 14, according to the Korea Gold Exchange. The don (3.75 grams) is a Korean unit used to measure gold.

Gold prices have trended higher following previous North Korean provocations, such as military scuffles and attacks on land and maritime borders.

Last year, the price for the precious metal jumped 1,100 won to 168,850 won after the North’s suspected torpedoing of the South’s Cheonan warship. Towards the end of the year, gold prices surged 5,500 won to 209,000 won after the communist regime shelled Yeonpyeong Island near the inter-Korean border in the Yellow Sea.

Analysts said a rise in the U.S. dollar following Kim’s death was the biggest booster for gold price gains.

On Monday, the local currency closed at 1,174.8 won against the greenback, down 16.2 won from the previous close.

“Domestic gold prices, which track global prices, tend to rise when the greenback gains,” said Jun Min-kyu, an analyst at Korea Investment & Securities.

Others said investors’ nervous sentiment was another factor that prompted them to snap up the safe asset.

However, most analysts downplayed the impact North Korean risks will have on future gold prices, citing a stabilizing Korean won and South Korea’s relatively small holdings within the global gold market.

“It seems that developments relating to the euro zone debt crisis are more critical than North Korean affairs when determining the gold price,” Jun said.

“Geopolitical risks on the Korean Peninsula may impact gold prices in the short term, but given South Korea’s small trading share in the global market, the impact will likely be short lived,” said Lee Seung-ho, a researcher at Daishin Securities. Yonhap