The biggest driving force behind the decline in gold prices can be found in the hawkish policy stance of the U.S. Federal Reserve System (Fed). Despite recently freezing the base interest rate, the Federal Reserve sent a strong signal of tightening to the market by leaving open the possibility of further interest rate hikes within the year. Since gold is essentially an asset that does not generate interest or dividend income, when market interest rates rise, its investment attractiveness is bound to drop sharply compared to interest-earning assets such as government bonds or deposits. In fact, as U.S. Treasury yields remain high following the Federal Reserve's remarks, many global investors are reducing their gold holdings and turning their attention to dollar assets, leading to an 'escape rush'.

The strength of the dollar is also a key variable holding back gold prices. As U.S. economic indicators appear stronger than expected and the outlook for prolonged high interest rates strengthens, the value of the dollar, the world's key currency, is showing a strong upward trend, reaching a new all-time high. International gold prices are usually expressed in dollars, so when the value of the dollar rises, the price competitiveness of gold is bound to weaken. In this situation, as the dollar monopolizes the status of a virtual 'safe asset' instead of gold, it is clearly observed that the demand for gold is decreasing compared to the past.

Easing geopolitical risks also contributed to the correction in gold prices. The recent news of an interim peace agreement between the United States and Iran has resulted in a significant decrease in tensions in the Middle East region. So far, the geopolitical crisis has acted as a strong safe asset premium that pushes up the price of gold, but as the possibility of military conflict decreases and uncertainty in the energy supply chain resolves, market anxiety quickly calms down. As a result, investors have less reason to insist on gold as a hedge against inflation, and as oil prices fall and inflationary pressures ease, downward pressure on gold prices has intensified.

However, the trend in the domestic market shows a somewhat different pattern from the downward trend in the international market. Although the international gold price continues to be weak, fluctuating between $4,100 and $4,200 per ounce, the domestic gold price is showing limited volatility as the variable of the rising won-dollar exchange rate partially offsets the decline. This is because when the exchange rate rises, the price of gold converted into Korean won becomes relatively more expensive. Therefore, a sophisticated approach is required for domestic investors to establish an investment strategy by not simply looking at trends in international gold prices, but also taking into account exchange rate movements and the supply and demand situation in the domestic real market.