Gold, crypto and dividends: Navigating asset value in a shifting market

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Gold, crypto and dividends: Navigating asset value in a shifting market

Published: 17 Jul. 2025, 00:03

Audio report: written by reporters, read by AI

Kim Kyung-rok

The author is an adviser at Mirae Asset Global Investments

Gold prices have surged in the past decade. A troy ounce that cost $1,200 10 years ago now trades around $3,300. Just a year ago, it was $2,300. Is gold expensive now — or still undervalued? Opinions vary. Some argue it's overpriced, while others expect further gains. But how do we judge whether gold is overvalued or undervalued? While valuation models exist, there is no definitive method to calculate gold’s “fair value.”

Typically, the value of an asset is determined by discounting its future cash flows to present value. Bonds are valued based on expected interest payments, real estate on rental income and stocks on future dividends. In some cases, calculations are adjusted for taxes and depreciation to focus on a company’s actual cash-generating capacity. Regardless of the asset type, future cash flows form the basis of valuation.

Gold prices neared an all-time high following Israel’s airstrike on Iranian nuclear facilities and Iran’s retaliatory attacks. On June 13 at 3:18 p.m. in New York, front-month gold futures rose 1.6 percent to $3,457 per ounce on the New York Mercantile Exchange. A staff member holds up a gold bar at the GoldPang Jongno branch in central Seoul on June 15. [NEWS1]

Relative valuation offers another method. For stocks, the price-to-earnings ratio is a common benchmark for whether a stock is over- or underpriced compared to its historical average or those of peers in the same industry. In this framework, earnings remain central to analysis.

Assets without dividends or earnings pose a more complex challenge. Cryptocurrency falls into this category. Holding crypto does not generate income like dividends because these assets lack profitability. This makes determining their intrinsic value particularly difficult. Warren Buffett has said he avoids investing in Bitcoin for precisely this reason. Still, that does not mean such assets are worthless. Depending on one’s vision of the future, cryptocurrency may hold value as a speculative or technological investment.

Bitcoin prices are shown on a screen at the cryptocurrency exchange Bithumb in Seoul in the morning of July 14. [YONHAP]

Why does the inability to assess fair value matter? It increases the risk of buying at inflated prices. When the United States suspended the gold standard in 1971, gold was priced at $35 per ounce. Amid inflation and oil crises, the price spiked to $560 in early 1980 and briefly hit $850. Futures even surpassed $1,000. Yet, by 2000, gold had fallen below $300 — a nearly 65 percent drop over two decades. Since then, prices have rebounded, rising tenfold.

Assets without income also carry longer durations and higher risk. Consider two investors — one buys 100 million won ($72,000) worth of gold, the other the same amount in dividend-paying stocks with a 4 percent yield. If neither asset appreciates in 20 years, the gold investor earns nothing. But the stockholder receives 4 million won annually, totaling 80 million won. With reinvestment, this could rise to 120 million won — more than recouping the principal. Dividends provide a buffer in stagnant markets, reinforcing the investor’s position over time. With income-generating assets, time becomes an ally, encouraging long-term investment. For non-dividend assets, stagnant prices lead to erosion over time.

Buffett advises individuals to invest in assets that generate income. He categorizes assets into three types: good, strange and bad. Good assets — such as businesses, real estate and farms — generate cash flow and are likened to “commercial milk cows.” Strange assets, like gold or oil, offer no dividends. Bad assets, like money market funds, may not even keep pace with inflation.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 3,215.28 points on July 15, up 13.25 points, or 0.41 percent, from the previous trading session. [NEWS1]

In recent years, many have asked whether cryptocurrency can be a retirement investment. It reflects a desire to invest in the future. While no one can predict how the future will unfold, and young investors may allocate a portion of savings to crypto, income-generating assets should form the core of personal asset management. Investing inherently carries risk, and dividends help mitigate that risk by providing consistent cash flows.

A common question during lectures is, “What is a safe investment?” The honest answer: No investment is entirely safe. That’s why they offer returns. Asset management is about reducing risk while still enjoying returns. One proven way is to hold income-generating assets. These assets should be at the heart of a sound personal financial plan.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.