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Prices of safe assets turn weak on revived risk-on

Prices of safe assets, such as gold and bonds, in South Korea are turning bearish, market data showed Wednesday, as investor risk appetite has been revived on hopes of a Sino-US trade deal and other positives.

The yellow metal, one of the most common safe assets, finished at 55,140 won ($46.9) per gram on the country's gold exchange Tuesday, according to the data from the Korea Exchange.

Tuesday's close was 10 percent lower than the 61,300 won recorded Aug. 13, the highest level since the gold exchange opened in March 2014.


The figure was still 19.9 percent higher than the gold metal's price at the end of last year, but it marked a turnaround from the uptrend so far this year.

"Gold prices are falling due to revived investor risk-taking on expectations for the possible easing of the US-China trade dispute and a recovery in the global economy," said Kim So-hyun, an analyst at Daeshin Securities Co.

Investors had been flocking to gold amid escalating trade tensions between the United States and China, the world's top two economies, and the US Fed's monetary easing, driving up their prices.

But the US-China trade row has recently been showing signs of abating amid the growing possibility of the two sides signing a small-scale deal.

The data also showed bond yields, which move inversely to prices, remaining higher than three month earlier, pointing to weaker investor appetite for the debt instrument.

The benchmark yield on three-year government bonds closed at 1.475 percent Tuesday, much higher than a yearly low of 1.093 percent posted Aug. 19.

With risk appetite perking up, domestic gold and bond funds have performed poorly in recent months.

According to financial market tracker FnGuide, 12 gold funds posted an average return of minus 4.6 percent in the past three months to Monday, with the corresponding figure for 267 domestic bond funds coming to minus 0.32 percent.

In contrast, domestic stock funds recorded an average yield of 8.37 percent during the period, and overseas equity funds chalked up 2.9 percent. (Yonhap)