Gold Has Soared Like This Before... Will You Regret Missing Out This Time? Experts Say "Gold Is Still Cheap" [Weekend Money]

From $3,992 to $4,467 per ounce
"Undervalued due to currency growth outpacing gold prices"

The price of gold, which had been undergoing adjustments, is rising again. While the value of gold is increasing, analysts say it is not yet at an overheated level.

The price of gold, which had been undergoing adjustments, is rising again. Getty Images

According to Investing.com on August 15, the December gold futures for the India market closed at $4,467.5 per ounce on the 12th. After hitting $5,354.8 per ounce on January 29 and undergoing a period of adjustment, the price of gold had fallen to $3,992.1 per ounce by July 16. It then hovered around $4,000 per ounce before rebounding in recent days.

A customer is holding a gold necklace at a jewelry store in Mumbai, India. Photo by Yonhap News Agency

The value of gold is considered undervalued compared to the past. The ratio of gold price to total money supply (M2) tallied by Korea Investment & Securities was only 2.3 in the 1980s, but it has now risen to 5.8. An increase in this ratio means that gold is undervalued relative to the speed of money supply growth, or that currency values have expanded excessively.

Investment in gold is also increasing. In the past, more than half of the gold market demand came from the jewelry sector, but recently, the proportion accounted for by investment and central banks has grown rapidly. The share of gold investment demand, including gold bars, coins, and exchange-traded funds (ETF), was 29% before the COVID-19 crisis but has since expanded to 44%. Central banks are also increasing their gold reserves. The share of central bank gold demand rose from 7% in 2020 to 17% by the end of last year. As a result, gold has shifted from being regarded simply as a consumer good to being considered a financial asset and alternative currency that provides a hedge against geopolitical risk, inflation, and currency depreciation.

Jung Hyun-jong, a researcher at Korea Investment & Securities, said, "While gold prices are approaching high valuations, I believe the market is still some distance from being overheated."

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