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 an adjustment, is rising again. While the value of gold is increasing, analysts say the uptrend is not at an overheated level.

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

According to Investing.com on August 15, the December gold futures in India closed at $4,467.5 per ounce as of August 12. After reaching $5,354.8 on January 29 and undergoing a correction, the price of gold fell to $3,992.1 on July 16. It then hovered near the $4,000 level and has rebounded recently.

Gold is considered undervalued compared to the past. According to Korea Investment & Securities, the ratio of total money supply (M2) to gold prices was only 2.3 in the 1980s, but has since increased to 5.8. An increase in this ratio means either the value of gold is undervalued relative to the growing money supply, or the value of currency has expanded excessively.

Investment in gold is also on the rise. In the past, the gold market was dominated by demand for precious metals, which accounted for more than half of the market. Recently, however, the share of investment and central bank demand has increased dramatically. Before the COVID-19 crisis, investment demand for gold in the form of gold bars, coins, and exchange-traded funds (ETFs) accounted for 29% of the total. This percentage has grown to 44%. Central banks are also increasing their gold reserves. The portion of total gold demand by central banks rose from 7% in 2020 to 17% at the end of last year. As a result, gold's status has shifted from being purely a consumer good to serving as a financial asset and alternative currency to hedge against geopolitical risks, inflation, and currency devaluation.

Jung Hyun-jong, a researcher at Korea Investment & Securities, said, "Gold prices are approaching a high valuation, but I believe the market is still far from an overheated level."

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