South Korea buys gold for first time in 13 years

Section:

By In-Soo Nam
The Wall Street Journal
Tuesday, August 2, 2011

http://online.wsj.com/article/SB1000142405311190352020457648322395248874...

SEOUL, South Korea -- The Bank of Korea said Tuesday it increased the amount of gold held as part of the country's foreign exchange reserves for the first time in 13 years, diversifying its portfolio away from the dollar and toward an investment class widely considered a safer bet during crises.

The central bank bought 25 metric tons of gold from the global market between June and July, bringing its total gold reserves to 39.4 tons as of the end of July, the BOK said in a statement.

"The gold purchase, as a safety net, will help us cope with volatile global financial markets and enhance investor confidence in Korea in times of crises," Hong Taeg-ki, chief of the BOK's reserve management group, told Dow Jones Newswires. He declined to comment whether the BOK will continue with its gold purchases.

... Dispatch continues below ...



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This is the first time the BOK has resumed buying the precious metal since the central bank purchased gold from Koreans during the 1997-1998 Asian financial crisis, when Korean individuals took their personal gold out of their dressers as part of a public gold-raising campaign to help the country out of the crisis.

Central banks around the world have gained renewed interest in having gold as part of their monetary reserves after the 2007-2008 global financial crisis, and gold prices have soared on rising demand.

Prices of gold in the spot market rose to a record $1,632.74 a troy ounce Friday amid sovereign debt concerns in the U.S. and Europe. Gold prices fell only a tad even after the U.S. announced a debt deal Sunday.

European central banks, big sellers of gold just a few years earlier, have all since stopped offloading the metal. India and Sri Lanka were among major buyers when the International Monetary Fund sold gold last year. China, which has the world's biggest foreign reserves, has been increasing its gold holdings, though its purchases have been mainly from domestic producers.

Citing World Gold Council data, the BOK said the country likely ranks 45th in gold holdings with its 39.4 tons -- rising 11 notches because of its recent purchase.

BOK's gold holdings, at market prices, account for 0.7% of its reserves, up from 0.2% prior to the purchase.

The BOK said Korea's reserves rose for the first time in three months to a record high of $311.03 billion at the end of July.

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