As international gold prices have fallen by approximately 291 TP3T from their peak in January of this year, concerns are mounting among gold holders. In particular, for those who purchased gold at nearly 1 million won per don last January, the perceived loss is likely significant. This article summarizes how much gold prices have actually dropped, why there is a discrepancy between international and domestic rates, and what criteria should be used to make judgments in the current situation.
Gold Price Plunges 291 TP3 T, Where Exactly Does the Decline Begin?
International spot gold prices have shown a steady downward trend since surpassing $5,400 per ounce in January of this year, and the closing price on October 23 fell to $3,995.63. This represents a drop of approximately 291 TP3T from the peak.
During the trading session on this day, it fell to $3,986.50, breaking the $4,000 mark.
It is considered an unusual trend that gold, once regarded as a leading safe-haven asset, has fallen to this extent in less than a year.
The domestic KRX gold price has fallen more than the international market price.
The price of gold on the domestic KRX market fell from a January high of 269,810 won per gram to 171,270 won on the morning of October 23. In terms of percentage decline, this is approximately 36.51 TP3T, which is a larger drop than the 291 TP3T decline in international gold prices.
The reason for this difference is that domestic gold prices do not simply reflect international market rates, but are also influenced by the won-dollar exchange rate and domestic supply and demand conditions.
Therefore, it is necessary to keep in mind that simply calculating the profit and loss of domestic gold investment based solely on international gold prices may deviate from reality.
If you bought it for 1 million won, what is the current loss rate?
Based on one don (3.75 grams) of pure gold, the highest price in January was around 1.12 million won, and the selling price at the Korea Gold Exchange on October 23 was approximately 642,000 won. If you had purchased it in the 1 million won range in January, its current value could be assessed at a lower level than this.
Since the price received when selling is often lower than the selling price, the actual loss rate can be larger, around 36%.
In addition, since costs such as value-added tax and processing fees are reflected in the price difference when buying and selling physical gold, the perceived loss may feel greater than calculated based solely on the decline in international market prices.
Why did the price of gold fall along with interest rates?
Typically, when interest rates fall, the attractiveness of gold—which does not generate interest—increases, leading to a general trend where gold prices rise. In fact, the real yield on U.S. 10-year Treasuries fell to 2.641 TP3T on October 22, down 0.121 TP3T points from the previous day.
However, this time, a paradoxical situation emerged where the price of gold fell along with the decline in real interest rates.
For this reason, the market is discussing the possibility that a combination of factors may have had an impact, such as leveraged investors selling gold to secure cash following the stock market crash, or soaring oil prices and growing inflation concerns stemming from tensions in the Middle East. However, it is important to note that the actual scale of such selling has not been clearly confirmed.
3 criteria to check in the current situation
Rather than hastily deciding to buy or sell based solely on the fact that gold prices have dropped significantly, it is more rational to sequentially check whether the conditions that caused the decline are changing.
First, check the real interest rate and the direction of the dollar.
Whether the trend of real interest rates and the strong dollar reverses could be a leading signal for the recovery of gold prices.
Conversely, if real interest rates rise again or the dollar continues to strengthen, it can be seen that additional downward pressure remains.
Second, we will monitor international oil prices and the direction of the Federal Reserve's interest rate policy.
If soaring oil prices lead to inflation concerns and the Federal Reserve leans toward raising interest rates, it could become a burden on gold prices.
Conversely, if a trend of calming concerns regarding oil prices and inflation is confirmed, it can be interpreted as a signal of stability for gold prices as well.
Third, we examine gold ETF fund flows and central bank purchasing trends.
According to data from the World Gold Council, the net gold purchases by central banks last August were reported to be around 39 tons, indicating that central bank purchases themselves are continuing steadily.
Central bank purchases tend to move independently of short-term price fluctuations and are considered a factor that supports gold prices in the long term. However, the limitation that it is difficult to draw definitive conclusions about overall global capital flows based solely on data from specific regional ETFs must also be taken into account.
How do experts view the outlook?
Goldman Sachs has projected that the price of gold will reach $5,400 per ounce by the end of 2027. This figure is based on the assumption of a significant rise from the current price.
However, since this forecast is based on data from before the recent sharp decline began in earnest, further verification is needed to determine whether the same target price is still being maintained.
Rather than the forecast figures themselves, it is more important to look at whether the central bank purchasing trends or real interest rate flows supporting those forecasts are actually continuing.
Key Points of the Gold Price Crash Summary in Q&A
Q1. How much has the price of gold fallen from its peak?
International spot gold prices fell approximately 291 TP3T from their January high, closing at $3,995.63 on October 23. The domestic KRX gold market declined approximately 36.51 TP3T during the same period.
Q2. If I bought one don for 1 million won, how much of a loss would I incur if I sold it now?
One don, which peaked at 1.12 million won in January, fell to the level of 642,000 won at the Korea Gold Exchange on October 23. Since the selling price may be lower than this, the loss rate could increase to around 361 TP3T.
Q3. What is the reason that the domestic gold price has fallen more than the international gold price?
This is because domestic gold prices are influenced by the won-dollar exchange rate and domestic supply and demand conditions, in addition to international market prices. Consequently, there is a difference between the rate of decline in international gold prices and the rate of decline in domestic KRX gold prices.
Q4. Why did the price of gold fall along with interest rates?
While falling interest rates are typically a positive factor for gold prices, this time the decline is interpreted as a result of a combined effect of factors, including the possibility of leveraged investors selling gold and concerns about inflation driven by rising oil prices. However, the exact scale of the selling has not been confirmed.
Q5. Is now the right time to buy gold at a low price?
Rather than rushing to buy simply because prices have fallen significantly, it is reasonable to make a decision after jointly monitoring real interest rates and the direction of the dollar, international oil prices and Fed policy, as well as ETF fund flows and central bank purchasing trends. You must also consider that investment decisions and the responsibility for them lie solely with the investor.