Gold in high demand on possibility of rate cut

Home > Business > Finance

print dictionary print

Gold in high demand on possibility of rate cut

Korean investors, like their global counterparts, have been flocking to gold on concerns of economic weakness and instability.

Gold prices hit their highest levels in 14 months last Friday as signs of an economic slowdown increased the possibility of an interest rate cut by the U.S. Federal Reserve.

Spot gold rose 0.6 percent to $1,343.07 per ounce, while U.S. gold futures settled $3.40 higher at $1,346.10. One of the key triggers was a U.S. jobs report that suggested slowing economic growth.

In the domestic gold market, prices advanced 0.5 percent to 205,500 won ($173.37) per don, or 3.75 grams, on Friday, according to the Korea Gold Exchange. The level is a three-year high, although the price retreated to 204,500 won on Monday after U.S. President Donald Trump called off proposed tariffs of goods from Mexico.

The sale of gold bars has been brisk at major banks in Korea, with 16 billion won worth of sales recorded in May. The total was three times the average monthly sales over the past 12 months.

The banks - including KB Kookmin Bank, Woori Bank and KEB Hana Bank - sold a total of 298,452 grams of gold last month, almost double April’s 149,595 grams.

The growing popularity of the metal came as more Fed watchers bet on an interest rate cut against the backdrop of a slowdown in the global economy.

Gold, a safe-haven asset, often strengthens when the possibility of a rate cut increases.

Kong Dong-rak, an economist at Daishin Securities, said that current economic conditions point to higher demand for safe assets, including the dollar and gold.

“Considering that doubts over the health of the U.S. economy have just started taking hold, it will take a long time to revive investor interest in risky assets,” he said.

The World Bank said global trade is expected to grow just 2.6 percent this year, the slowest pace since the 2008 financial crisis.

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)