Surge in Gold Investments Amidst Geopolitical Tensions and Economic Uncertainty

An increasing number of bank customers are turning to gold investments through specialised deposit accounts that facilitate the buying and selling of this precious metal. The surge in gold prices is attributed to heightened geopolitical tensions and a growing inclination towards safe-haven assets.

The major commercial banks in the region have collectively reported significant growth in the number of accounts dedicated to gold investments. These accounts allow depositors to invest cash, which the banks then use to purchase gold on their behalf after consulting with the clients. Account holders can either take physical possession of the gold or choose to retain it until market conditions allow for greater appreciation, enabling potential cash withdrawals exceeding their initial investments.

The rise in "gold banking accounts" has been steady, particularly as global conflicts such as the war in Ukraine and the recent Israel-Hamas conflict have intensified financial uncertainties. The number of such accounts increased from 243,981 in December 2022 to 255,887 by the latest count in March of this year.

Gold prices have seen remarkable growth on international exchanges, with the Commodity Exchange (COMEX) in New York marking a historical high. Prices surpassed the $2,100 mark for the first time on March 4, then exceeded $2,300 on April 3, before reaching a peak of $2,448.8 on April 12. Despite a slight decline afterward, the momentum remained strong.

In the domestic market, gold was priced at 105,790 won ($75.60) per gram on April 12, reflecting a 3.18% increase from the previous day. The total balance of gold held in "gold banking accounts" across the major banks amounted to 600.7 billion won as of mid-April, marking a 14.6% rise since January.

Market analysts suggest that geopolitical factors, such as missile attacks in the region, may contribute to further increases in gold prices. Additionally, expectations surrounding potential interest rate cuts by the U.S. Federal Reserve have influenced the market, although the timing of such cuts remains uncertain due to persistent inflation and a strong economy in the U.S.

There exists an inverse relationship between gold prices and interest rates, with gold typically becoming more attractive in a low-interest-rate environment. Thus, the ongoing economic and geopolitical dynamics are likely to sustain interest in gold as an investment.