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Gold, silver funds shine as investors seek low-risk assets

(123rf)
(123rf)

Gold and silver funds in South Korea are shining on rising demand for safe investments amid lingering uncertainties in markets over the pandemic and renewed Sino-US conflict, data showed Thursday.

The annual average return rate of 12 local gold funds with assets of 1 billion won ($808,000) or more came to 43.41 percent as of Wednesday. The figure outpaced the median return rate of 1.07 percent for domestic stock funds in the cited period, according to data compiled by FN Guide.

As investors sought to park their money in safer destinations, gold futures price for June delivery on Comex in New York marked $1,705.60 for 28 grams on Tuesday (local time). Spot gold previously jumped to $1,764.73 for 28 grams on May 18, the highest since October 2012.

Gold in the local market also closed at 68,170 won per gram on Wednesday. The price had surged to 70,000 won on May 18, the highest since April 27, when the figure reached 68,890 won during the trading session, according to the Korea Exchange Gold Market.

Market watchers attributed the rise in gold prices to growing investors’ appetite for low-risk assets.

Concerns over deflation have been growing as a result of monetary expansion policies as well as escalating political tensions between the US and China over imposing the national security law in Hong Kong have fueled pressure on markets.

“There are still possibilities of a second wave of COVID-19 and further souring Sino-American relations,” said Kim So-hyun, an analyst at Daishin Securities. “Amid the lingering uncertainties, demand for gold as investment assets will further increase.”

Meanwhile, the data showed silver funds have also outperformed. As of Wednesday, the three-month return rate of Samsung Kodex Silver Futures Special Asset -- the nation’s only silver-backed exchange-traded-fund -- recorded minus 5.19 percent. But its return rate in a month came to 13.79 percent, close to the fund’s annual return rate of 15.99 percent.

The precious metal, which can be used for accessories and industry materials, has reemerged as a safe haven as major countries resumed their economic activities. Local analysts forecast that silver funds will further outperform as the metal’s price is likely to be on rise for a while.

“Silver prices are expected to hit $21 for 28 grams this year. When deflation risks get eased, silver will further shine as an investment asset,” said Hwang Byung-jin, an analyst at NH Investment & Securities.

By Jie Ye-eun (yeeun@heraldcorp.com)
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