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● Gold Panic-Sell Signal!

2024 Domestic Gold Investment: Domestic Gold Prices Escape the Decline, Reasons for Being Cheaper Now, and Future Strategies

The current gold market isn't just rebounding from a downturn; the rules of the game have completely changed.
Unlike the past when domestic gold prices felt particularly expensive, we'll explore why they are now cheaper than international gold prices, the reasons behind this, and the strategies that gold investors must remember at each point in time.
We will clarify misunderstandings about gold investment losses, the transition between long-term bear markets and bull cycles, premium fluctuation patterns, and the appropriate gold holding ratio
Based on actual cases and data, we'll break it down easily, so you should definitely keep in mind the top economic keywords such as interest rates, inflation, exchange rates, asset diversification, and portfolio diversification.

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1. Why is Domestic Gold Investment Different Now Than in the Past?

• After the 2020 COVID-19 pandemic, global gold prices recorded all-time highs.
• However, in Korea, due to exchange rates, taxes, distribution structure, and high premiums, the actual benefits of gold investment decreased.
• In the past, buying gold in Korea resulted in losses of -20%, and in many cases, -40% based on actual repurchase prices.
• However, in recent years, the domestic gold price structure has changed to be cheaper than global prices.
• The reversal of domestic/foreign gold prices is directly related to the movement of the KRW/USD exchange rate, global inflation, and changes in investment sentiment (decreased preference for gold → reverting to peak).
• Key: Temporary imbalances due to high exchange rates + the impact of gold market reopening reorganization.

2. The Long Downturn and Current Position

• Gold prices rose in the 1970s and 80s, followed by a nearly 20-year long downturn with a -70% drop from the peak.
• From the early 2000s, it entered a re-rising phase due to inflation, US policy interest rate adjustments, and a weak dollar.
• Recently, global economic uncertainty, the US Federal Reserve's interest rate policy, and geopolitical risks have simultaneously acted, and gold has been re-evaluated as a 'safe asset'.
• Currently, a typical cycle is observed, with the first peak passed and moving towards the second peak (finale).
• Usually, at the end of a gold price rise cycle, there is frenzy, and investment should be approached with caution (bubble + premium surge).

3. Why are Premiums and Sentiment Important for Investment?

• Domestic gold price premiums have extreme fluctuations depending on supply and demand and sentiment.
• When investors flock in, premiums of +10~20% compared to international prices are added.
• In the past, gold investment was effectively a loss due to premiums + transaction taxes + unfavorable exchange rates,
  Recently, however, exchange rate defense, reduced transaction distribution costs, and increased supply have resulted in discount periods.
• If you divide and buy gold in this range, you can reduce the risk of decline, and it is easy to realize profits during the rising period.

4. How Much Gold Investment is Appropriate?

• There is some common ground in experts' opinions.
• As a safe asset, gold should be incorporated within 5-10% of total assets.
• During temporary surges (the peak of the cycle), reduce the proportion and convert to cash,
  It is recommended to divide and buy during adjustment periods (when premiums/domestic prices are relatively cheap).
• Since there is a high correlation with the dollar/exchange rate, it is necessary to monitor global economic uncertainty/inflation/exchange rate forecasts together.
• It is difficult to accumulate wealth through gold investment alone, so a diversified portfolio strategy is important.

5. 2024-2025 Outlook and Action Strategies

• Short-term volatility is expected to increase due to expectations of a US Federal Reserve rate cut + US presidential election + geopolitical issues such as the Middle East/Ukraine.
• In the long term, the trend will likely be determined by inflationary pressures and the trends of major demand countries such as China/India.
• The current reversal of domestic gold prices can be an opportunity to realize profits when the exchange rate stabilizes.
• When entering the final phase of the second rising peak, be careful of the 'investment frenzy' that flocks. It is recommended to sell when the premium is high.
• It is essential to check gold prices/exchange rates/premiums separately. We recommend a perspective of betting on undervalued domestic gold prices + dollar linkage.

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< Summary >

The domestic gold price structure has escaped the downturn and is now cheaper than overseas.
Even if there is a long-term downturn, it is currently heading towards the second peak of the rising cycle.
Carefully consider premium/exchange rate/sentiment variables, and it is recommended to invest 5-10% of total assets as a safe asset.
It is recommended to sell when the premium is high and divide and buy during undervalued periods.
In 2024-2025, short-term volatility will be high, so it is essential to check the investment timing and exchange rate together.

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[Related Articles…]

• Korean Gold Prices: 2024 Price Outlook and Investment Strategies
• 2024 KRW/USD Exchange Rate Outlook and Its Impact on Asset Allocation

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