Gold Prices Reach Record High Amid U.S.-China Tariff Disputes

By Lee Kyung-min

Gold prices have surged to a record high of $2,844.56 (4.11 million won) per ounce as of Tuesday (local time). This rise has been driven by investors' inclination towards safe-haven assets amid ongoing tensions in the U.S.-China trade relations, according to market analysts.

As fears grow regarding economic stability, many investors are becoming increasingly risk-averse. As a result, there has been a noticeable decline in the appetite for stocks and cryptocurrencies like bitcoin, which are seen as more volatile investments.

The shift towards gold is leading more South Koreans to consider investing in gold bars and gold-related products offered by commercial lenders.

Experts believe that this trend will continue as geopolitical uncertainties and inflation concerns persist, particularly following actions taken by the Trump administration. With U.S. inflation rates remaining above 2 percent, the demand for gold as a hedge against these financial pressures seems set to stay strong.

Market data indicates that spot gold traded at $2,844.56 after previously touching an intraday peak of $2,845.14. Additionally, U.S. gold futures climbed to $2,875.80, marking an increase of 0.7 percent.

This all-time high for gold prices comes during a time of complicated trade policies, especially in light of recent tariffs announced by China on U.S. imports. These tariffs included a 15 percent tax on coal and liquefied natural gas, alongside a 10 percent tariff on crude oil, agricultural machinery, and large-engine vehicles imported from the U.S., set to take effect on February 10.

This response from China follows President Trump’s introduction of a 25 percent levy on imports from Canada and Mexico, and a 10 percent tax on goods from China. While the measures against China were enforced, Canada and Mexico were granted a temporary reprieve as Trump decided to pause action for 30 days under certain conditions related to border security and drug trafficking.

In Korea, gold bars are increasingly popular, with leading commercial banks adapting to the rising demand for gold investments. By the end of January, the total balance of gold banking accounts at KB Kookmin, Shinhan, and Woori banks reached 835.3 billion won, an increase of 268.5 billion won, or 47.4 percent, compared to the previous year. Additionally, the number of accounts for gold banking rose to 275,424, reflecting a growth of 9.2 percent from the year before.

Gold banking allows individuals to purchase as little as 0.01 grams of gold without the need for storage, making it a convenient option for investors.

Sales of physical gold bars have also surged, with KB Kookmin, Shinhan, and Hana banks reporting sales worth 137.7 billion won, marking a staggering 167 percent increase from 51.5 billion won in the same period last year. This amounted to a total of 1,243 kilograms sold, which is 92.9 percent more than the previous year’s total of 644 kilograms.

The outlook for gold remains bullish, particularly during the first half of the year. Hong Dong-hee, a senior investment strategist at Standard Chartered Bank Korea, shared insights on this trend. He noted that lower interest rates anticipated from the U.S. Federal Reserve and continued demand for safe-haven assets amidst geopolitical tensions under the Trump administration are likely to keep gold prices elevated.

When the Federal Reserve cuts rates, gold becomes more appealing to investors, as lower yields on bonds and savings accounts reduce the opportunity cost of holding non-yielding gold. Additionally, a weaker U.S. dollar enhances the buying power for gold, leading to higher prices. A robust demand for gold as a safeguard against trade uncertainties is seen as a key factor for its sustained growth.

According to the Korea Gold Exchange, the price of 3.75 grams of gold reached 564,000 won recently, which is a 7 percent increase since the start of the year and over 12 percent higher than the 503,000 won price at the end of November.

In contrast, the Korean stock index KOSPI experienced fluctuations, dipping to an intraday low of 2,437.61 points on Monday, nearly reversing the gains from the previous month. It closed at 2,509.27 points on Wednesday, reflecting a modest rise of 1.11 percent from the previous session.

Meanwhile, bitcoin, which reached an all-time high of over $106,490 in mid-December, has seen significant drops, currently fluctuating between $93,000 and $105,400 as of the end of December.

gold, investments, uncertainty