As gold prices continue their rally, the average return of gold-related exchange-traded funds (ETFs) has exceeded 20% in just the past month. An unusual phenomenon is emerging in which investor sentiment toward both stocks, a risk asset, and gold, a safe-haven asset, is rising together.
According to FnGuide on Oct. 19, an analysis of the returns of seven products classified as gold-related ETFs showed an average one-month return of 20.6%. The highest return during this period was ACE KRX Gold Spot at 29.0%. TIGER KRX Gold Spot followed at 28.9%.
Although gold ETF prices have already risen significantly, individual investor sentiment remains hot. Looking at individual investors' net purchases over the past week (Oct. 13–17), ACE KRX Gold Spot (129 billion won) ranked No. 3. In addition, TIGER KRX Gold Spot (No. 5, 99 billion won) and KODEX Gold Active (No. 6, 97 billion won) brought the total number of gold-related ETFs in the top 10 to three.
After standing around $2,000 in Mar. last year, the spot gold price broke above $4,300 per ounce on the afternoon of the 16th (local time), once again setting an all-time high of $4,318.75.
The securities industry sees the rise in gold prices, a representative safe-haven asset, as the result of overlapping factors such as increased demand from Central Banks amid interest rate cuts and heightened global geopolitical uncertainty, including the rekindling of U.S.-China trade tensions. Some also analyze that the deterioration of major countries' fiscal conditions has weakened confidence in bonds, contributing to safe-haven demand flowing into gold.
Yoon Yeo-sam, a researcher at Meritz Securities, said, "From an economic perspective, the current rise in gold prices is benefiting from liquidity supply," adding, "While liquidity supply is not a phase that significantly stokes inflation, it is in fact helping lift overall asset prices."
He went on, "Institutions buying gold have lowered trust in the surging fiscal deficits and government liability of major countries, and President Donald Trump's trade war has affected the stability of counterpart countries' currency," adding, "Gold has become a substitute for bonds."
Some suggest gold prices could rise further. According to the financial investment industry, major investment banks (IBs) such as JPMorgan and Goldman Sachs expect gold to climb to $4,800 per ounce.
Oh Jae-young, a researcher at KB Securities, said, "Once gold prices rise, the uptrend tends not to fade easily," adding, "Even if the current gold rally is overheated, expectations for additional rate cuts by the U.S. Federal Reserve (Fed) in Oct.–Dec., inflows into gold ETFs, and continued Central Bank buying will likely push gold prices higher without a major correction."