Gold bars are displayed at the Korea Gold Exchange's main branch in Jongno-gu, Seoul. [Yonhap]
Gold bars are displayed at the Korea Gold Exchange's main branch in Jongno-gu, Seoul. [Yonhap]

The domestic price of gold, widely regarded as a safe-haven asset, fell below 200,000 won ($131) per gram for the first time in six months, as renewed Middle East tensions compounded concerns over a possible Federal Reserve interest rate hike.

According to Korea Exchange, gold spot prices (99.99%, 1 kg) on the KRX gold market fell 3.54 percent from the previous session to 198,120 won per gram in early trading Thursday. The price opened at 198,060 won per gram and at one point slid as low as 196,780 won. As of 1 p.m., it was trading at 199,140 won per gram.

It was the first time gold prices on the KRX gold market had dropped below 200,000 won since Dec. 11 last year.

The domestic decline tracked a sharp drop in international gold prices. August gold futures on the COMEX exchange, operated under the CME Group in Chicago, closed overnight at $4,133 per ounce, down 3.6 percent.

Market watchers attributed the broad selloff in precious metals to rising oil prices, a stronger dollar and higher US government bond yields after Donald Trump raised the possibility of additional strikes against Iran. Because gold, like bonds, pays no interest, higher rates tend to erode its appeal as an investment.

"The US core consumer price index for May rose 0.2 percent month-on-month, coming in below the market forecast of 0.3 percent, which initially supported precious metal prices," said Ok Ji-hoe, a researcher at Samsung Futures. "But Trump's subsequent remarks about possible further strikes on Iran pushed up oil prices, the dollar index and US interest rates, sending precious metal prices into a decline."


jshan@heraldcorp.com