Individuals Buy Gold for First Time in 4 Months... After Selling 500 Billion Won Over 3 Months

Market sentiment is shifting as individual investors move to buy gold for the first time in four months. According to the Korea Exchange on the 17th, individuals net purchased 133 billion won worth of gold in the on-market gold sector from the 1st to the 14th of this month. This marks a shift in investment sentiment compared to the previous three months from May, during which they sold off 524 billion won worth of gold. Investment capital is returning to gold as prices begin to rise again.

After showing a sharp upward trend last year, gold prices underwent a correction. While gold is a representative safe-haven asset, it is also closely correlated with interest rates. Since gold itself generates no interest or dividends, assets that pay interest, such as deposits or bonds, become relatively more attractive during periods of high interest rates. Conversely, when the trend of rate hiking is reversed and expectations for a decline grow, the opportunity cost of holding gold decreases, leading to renewed investment demand.

The recent catalyst for the rebound in gold prices stemmed from shifting expectations regarding monetary policy. Disappointing U.S. employment figures for July and a slowing in the rise of the Consumer Price Index eased fears of tightening by the Federal Reserve, leading to expectations of reduced interest rate burdens, which in turn drove gold prices higher.

It has been reported that the Bank of Korea has resumed purchasing physical gold for the first time in 13 years. Interest in gold's role as a store of value and as a safe-haven asset has also risen simultaneously.

Gold prices are influenced by U.S. interest rate policy, inflation, and employment indicators.