As international gold prices topped $5,000 per ounce (about 725,000 won), setting a record high, forecasts are piling up about the potential for further gains. Analysts say gold is reemerging as a representative safe-haven asset as geopolitical tensions rise, Central Bank purchases continue, and investment demand grows on expectations for rate cuts.
On the 26th (local time), spot gold prices topped $5,100 per ounce intraday, setting a new record high, according to Reuters. As global political and economic uncertainty widens, risk-off sentiment has strengthened, extending the rally in gold. Gold has already risen sharply this year, and some analysts are even raising the possibility it could break through the $6,000 level within the year.
Gold price forecasts are being revised upward overall. A London Bullion Market Association (LBMA) survey showed this year's average gold price is expected to be around $4,700. Some predict the record high could top $7,000. Goldman Sachs raised its year-end gold price outlook to $5,400 from $4,900.
Geopolitical risk is cited first as the backdrop for rising gold prices. Frictions between the United States and its allies over the Greenland issue and tariff uncertainty, concerns about the independence of the U.S. Federal Reserve (Fed), and the upcoming U.S. election schedule are heightening market uncertainty. Wariness toward an equity market dogged by overvaluation fears is also prompting some funds to shift into gold.
Aggressive purchases by the Central Bank are also underpinning gold. As emerging economies continue moving to diversify foreign reserves into gold, Central Bank demand is expected to remain solid this year. Goldman Sachs projected emerging-market Central Banks will buy an average of 60 tons (t) of gold per month. The Central Bank of Poland set a goal to increase its gold holdings to 550 t, and the Central Bank of China has continued buying gold for 14 consecutive months.
Inflows into gold-backed exchange-traded funds (ETFs) and retail investor demand are also supporting prices. As rates fall, the opportunity cost of gold, a non-interest-bearing asset, declines, so if the rate-cut cycle continues, the appeal of gold investment could grow further. According to the World Gold Council, gold ETFs saw record inflows last year, with investment demand surging mainly in North American funds.
Jewelry demand for gold has slowed somewhat due to the sharp price rise, but physical investment demand for gold bullion and coins remains firm, led by India and Europe. Some investors are taking profits, but observers say it is not enough to change the overall supply-demand picture.
Still, a short-term correction cannot be ruled out. If expectations for rate cuts weaken or margin calls (requests to top up collateral in leveraged transactions) occur due to increased stock market volatility, a temporary price correction could appear. If concerns about the Fed's independence ease or geopolitical tensions cool, the pace of gains could slow.
Even so, the prevailing view in the market is that any decline in gold prices is likely to be seen as a buying opportunity. Because the economic and geopolitical environment is unlikely to shift to a stable phase in the near term, the outlook is strengthening that gold will continue to play a key safe-haven role in the global financial market for the time being.