"We're busy because there are many customers today, so if you're not going to buy, please leave quickly."
At about 4 p.m. on the 2nd, a jewelry shop owner on the precious metals street near Jongno 3-ga Station in Jongno District, Seoul, said this. It would usually be a relatively quiet time of day, but that day each store was crowded with customers asking about selling gold.
At the counter inside the store, questions like "Is it right to sell now?" and "Do you think it will fall further?" were repeated. Another owner, a person surnamed Kim, 58, even tried to talk an office worker out of selling, saying, "In the long term, gold is likely to rise again."
As the prices of gold and silver, which had been on a tear, plunged, a tense game of chicken unfolded in Jongno 3-ga, the country's largest precious metals market. Worried that gold and silver prices could fall further, some consumers rushed to sell. Jewelry shop owners judged it a temporary correction and increased purchases or recommended that consumers buy.
◇ "Let's sell even now" vs. "Uptrend in the long term"
According to Investing.com on the 3rd, on the New York Mercantile Exchange (COMEX) in the United States, as of 10:30 a.m. Korea time that day, the March silver futures price was $85.3 per troy ounce (about 31.1 g). It had pierced the $120 level on the 29th of last month, but plunged 31.4% the next day to $74. It has since been moving sideways in the $80 range.
Gold prices were similar. The April gold futures price broke through $5,600 per troy ounce on the 29th of last month, then sank to $4,700 the next day. As of that day, it had recovered slightly to $4,870.
With the sharply rising prices of gold and silver plunging at the same time, the mood on the Jongno 3-ga precious metals street also changed. Jewelry shop owners said with one voice that until recently there had been many inquiries about buying, but overnight, customers flocked to sell gold and silver.
One owner said, "It feels like sell inquiries are up about 20% to 30% from usual," adding, "People worried about further declines kept coming in from the morning to quickly unload their gold."
There were also customers troubled as the prices of gold and silver, considered relatively safe assets, whipsawed. An office worker, a person surnamed Park, 32, who said they came to look at couple rings, said, "People around me say gold prices could fall further," and "I'm debating whether to buy now or wait another month or two."
Jewelry shop owners met on site were generally optimistic that both gold and silver prices would trace an upward curve over the long term. A person surnamed Jeong, 45, said, "I expanded gold orders to secure inventory, aiming for the crash," adding, "I think you need to take on volume at times like this." A person surnamed Kim, 47, said, "Many people came to sell thinking gold prices will keep falling," but added, "Given the uptrend so far, prices will keep rising. It's actually an opportunity because you can buy at prices from two to three weeks ago."
One owner hinted that quite a few customers were taking the steeply fallen silver as a buying opportunity. The owner said, "Maybe because expectations for a rebound in silver are high, most people are coming to buy," adding, "For asset and investment purposes, there's nothing quite like it."
◇ Experts say "bull case still holds"
Several factors are cited behind the plunge in gold and silver prices. U.S. President Donald Trump tapped Kevin Warsh, who argues for a "strong dollar," as the next Federal Reserve (Fed) chair. A stronger dollar is a bearish factor for gold and silver, which are alternatives.
In addition, the CME Group strengthened margin requirements for precious metals futures transactions, and China's financial authorities also moved to regulate silver-trading funds.
Above all, the fallout was heavy because many investors used leverage while gold and silver prices were rising steeply. As prices fell and margins ran short, a chain of margin calls (additional collateral requirements) occurred, turning the decline into a self-reinforcing slide.
Still, major global investment banks (IBs), like jewelry shop owners, see a strong likelihood that gold prices will rise over the long term. JPMorgan projected in a recent report that gold would be $6,300 per ounce by the end of this year.
JPMorgan said, "We expect central banks to buy 800 tons (t) of gold this year, and private investors' preference for physical assets is providing strong price support," adding, "The bull case for gold still holds."