Gold prices on the KRX market fell to their lowest level this year, closing at 189,810 won on the 24th as the US-Iran conflict drove oil prices higher and reduced demand for non-interest-bearing assets. The decline came despite traditional safe-haven buying patterns, as investors focused on inflation risks from surging crude and potential Federal Reserve rate pressures. Middle East tensions eased over the weekend with Oman mediating negotiations, leading to sharp oil price drops and gold recovering above 190,000 won on the 27th.
KRX Gold Price Falls 29.65% from January Peak
According to the Korea Exchange on the 27th, the KRX gold market's spot gold (99.99% purity, 1kg) price closed at 189,810 won on the 24th, the previous trading day. This represents a 5.85% decline from the closing price one month earlier (201,600 won) and marks the lowest price recorded this year.
Compared to early this year, the decline is even steeper. The price has dropped 29.65% from the yearly high of 269,810 won recorded on January 29. Gold prices turned bearish from late June and accelerated their decline in early July, falling to the yearly low.
Until early this year, gold prices maintained strength supported by inflation concerns, geopolitical risks, and increased gold purchases by central banks worldwide. However, as profit-taking emerged amid price burden from the first-half surge, the downtrend continued as safe-haven demand failed to materialize as strongly as expected despite the US-Iran conflict.
US-Iran Airstrikes Drive Oil Above $100 and Treasury Yields to 4.7%
The timing of gold's expanded decline coincided with the reignition of US-Iran tensions. Relations between the two countries, temporarily patched through a ceasefire memorandum of understanding (MOU) signed in mid-June, deteriorated again as airstrikes resumed at the end of last month. The US and Iran exchanged retaliatory airstrikes, each claiming the other violated the ceasefire agreement first.
As US airstrikes and Iranian retaliation continued, the MOU was effectively nullified, and military tensions persisted this month around the Strait of Hormuz and US military bases. On the 24th, when gold prices hit their yearly low, the US continued airstrikes against Iran for the 12th consecutive day.
Gold has historically been regarded as a leading safe-haven asset, with prices typically rising during periods of heightened geopolitical risk. However, the traditional formula of "war risk = gold price increase" did not apply this time.
Market analysts attributed the disconnect primarily to increased interest rate burden as international oil prices surged following the US-Iran re-escalation. On the 23rd (local time), after the renewed US-Iran conflict, Brent crude prices exceeded $100 per barrel for the first time in approximately two months, and the US 10-year Treasury yield surpassed 4.7% for the first time in one year and six months.
Investor attention shifted from safe-haven preferences to the possibility of oil-driven inflation. The potential for Federal Reserve rate increases became prominent, reducing the relative investment appeal of gold, which does not pay interest. Concerns over high interest rates dominated the market rather than safe-haven demand.
Oman Mediation Eases Tensions as Oil Drops to $87
Attention is now focused on whether gold prices can recover as US-Iran tensions entered a lull starting the 24th (local time). With mediator Oman stepping in to facilitate Strait of Hormuz negotiations, the US halted airstrikes and Iran also stopped retaliation. Consequently, October delivery Brent crude futures prices fell sharply to the $87 level.
Gold prices also recovered back above the 190,000 won level. As of 1:25 PM on the 27th, the domestic gold price (99.99% purity, 1kg) on the KRX market recorded 192,210 won, up 1.26% from the 24th, the previous trading day.
Hwang Byung-jin, Head of FICC Research at NH Investment & Securities, explained, "As high oil price burden from Middle East tensions has persisted for three consecutive months, short-term gold prices are forming a high negative correlation with international oil prices. The downward stabilization of international oil prices is perceived as mitigating negative factors for the gold market and creating a low-price buying opportunity."
FAQ
What was the KRX gold price on the 24th?
The KRX gold market's spot gold (99.99% purity, 1kg) price closed at 189,810 won on the 24th, marking the lowest price recorded this year and representing a 29.65% decline from the yearly high of 269,810 won recorded on January 29.
Why did gold prices fall despite the US-Iran conflict?
Gold prices fell because the US-Iran conflict drove international oil prices above $100 per barrel on the 23rd (local time), raising inflation concerns and pushing the US 10-year Treasury yield above 4.7%. Investors focused on potential Federal Reserve rate increases rather than safe-haven demand, reducing the appeal of non-interest-bearing gold.
How did gold prices respond to the easing of Middle East tensions?
As Oman mediated Strait of Hormuz negotiations starting the 24th (local time) and both the US and Iran halted attacks, Brent crude futures fell to the $87 level. Gold prices recovered above 190,000 won, reaching 192,210 won as of 1:25 PM on the 27th, up 1.26% from the previous trading day.
