high-flying interest in ‘gold’. For what reason? Up and down ‘roller coaster’.

Amid ongoing market volatility both domestically and abroad, interest in safe assets is on the rise. In particular, gold, which saw a surge in prices due to the war in the Middle East, is expected to rise in price if interest rates are cut next year.

According to the Korea Exchange on the 8th, the spot price of gold per gram in the KRX gold market closed at 83,240 won($70.23), down 0.01% from the previous trading day. The spot gold price rose to 87,610 won($73.94) on May 4th, setting a record high since the KRX gold market started trading in 2014, and rose again to 87,230 won($73.66) on the 30th of last month, but has recently been weak.

On the New York Mercantile Exchange (COMEX), the December gold futures price rose to the $2019 level on the 27th of last month (local time), but recorded $2000 again on the 6th.

Gold prices soared in the first half of this year as the demand for gold, a safe asset, increased due to the expansion of uncertainty in the global financial market and concerns about economic recession. Entering the second half, the price of gold has been rising again due to the effects of the war in the Middle East. On the 6th, just before the surprise attack on Israel by the Palestinian armed group Hamas, the gold price closed at $1845.2. It rose over 5% a week later on the 13th.

However, the gold price is currently falling as risk asset preference has temporarily recovered due to the dovish (currency easing preference) assessment of the November Federal Open Market Committee (FOMC) meeting. Although the upward trend has slightly broken, the volatility in the financial market continues, and the gold price is expected to turn back to an upward trend. The fact that emerging central banks are still showing a trend of buying gold is also expected to have an impact.

The expected end of the Federal Reserve (Fed) interest rate hike next year is also positive for gold investors. Gold prices move in the opposite direction to market interest rates. As gold is a physical asset with no separate interest, its investment appeal falls during interest rate hikes. On the other hand, demand is high for financial products that can earn interest income rather than physical assets.

Jeon Gyu-yeon, a researcher at Hana Securities, said, “Gold prices may be partially adjusted as speculative net buying positions weaken after the war issue disappears, but as the possibility of interest rate cuts is high, gold yields will expand in the first half of next year.” He also added, “The Fed’s interest rate cuts are expected to continue until the third quarter of 2024, and then fall around the fourth quarter.”