Gold, silver and copper all hit record highs. As of the 28th (local time), international gold futures prices soared 70% from the start of the year, topping $4,500 per ounce for the first time. Silver rose more than 140% to over $80 per ounce, and copper also climbed 30% to $5.85 per pound.
Spot purchases also surged. In Korea, gold bar sales at the five major banks (KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup) from Jan. 2 to Dec. 24 this year totaled 677.974 billion won, four times last year's full-year sales. Silver bar sales also skyrocketed 38-fold. Overseas direct purchases increased as well. Imports of gold bars and other crafted items rose 124% on-year, and imports of investment gold and silver coins jumped 572%.
The rush into gold, silver and copper is because a weaker dollar and expectations of interest rate cuts have combined to erode the purchasing power of fiat currency. Heightened geopolitical tension between the United States and Venezuela has strengthened a preference for safe assets, and concerns that persistent U.S. Government Bonds issuance will keep the fiscal deficit going have also spurred inflows into real assets.
Lee Ung-chan of iM Securities said, "Silver and platinum are rising in price as year-end speculative buying coincides with concerns about next year's fiscal expenditure." In particular, silver has emerged as an essential material for artificial intelligence (AI) data centers and the space and defense industries, with industrial demand driving prices.
Copper prices are being pushed up by a supply-demand imbalance. Jang Jae-hyeok of Meritz Securities noted, "Supply has fallen due to mine accidents, while nontraditional demand such as AI and electric vehicles is strong," adding, "The fight to secure ore is so intense that smelting fees have been agreed at $0."
Experts expect strength in gold, silver and copper prices to continue next year. Goldman Sachs raised its gold price target for next year to $4,900, and JP Morgan also projected $5,000. John Feeney of Guardian Vaults said it is "not a simple speculative bubble but the result of combined sensitivity to macroeconomic risks."
Still, there is a possibility of a pullback from short-term overheating. According to Investing.com on the 29th (local time), gold, silver and copper futures plunged 4% to 7% in a single day as profit-taking hit the market. If the U.S. economy proves stronger than expected and the pace of rate cuts slows, the dollar could strengthen again and push prices lower.
The most common way to invest in gold, silver and copper is through exchange-traded funds (ETFs) and exchange-traded notes (ETNs). Without holding the physical metal, small trades can be made via smartphone apps like stocks. Liquidity is good, but a 15.4% tax on dividends applies to capital gains. KODEX Gold Futures (H) and TIGER Gold & Silver Futures (H) are representative products.
For tax benefits, the KRX gold market is advantageous. Through a physical gold account run by the Korea Exchange (KRX), capital gains taxes and taxes on dividends are exempted. Because you are actually buying gold, you can withdraw it in physical form when desired. However, a 10% value-added taxes applies upon withdrawal.
Physical investment requires weighing the expense. A 10% value-added taxes and fabrication labor cost are added at purchase. In addition, market prices must rise at least 15% to 20% to break even. Note also that for overseas direct purchases, gold and silver are classified as crafted goods and subject to an 8% tariff and 10% value-added taxes.