Gold in foreign reserves bolstered

Korea’s central bank said yesterday it increased its holdings of gold in July to diversify its portfolio of foreign exchange reserves worth more than $300 billion. Korea purchased 16 tonnes of gold, raising the country’s gold holding to 70.4 tonnes valued at $2.98 billion at the end of July, according to the Bank of Korea.

The move marked the BOK’s third purchase of the metal since the bank bought it in July last year for the first time in 13 years. Its second purchase came in November.

“The stabilizing currency market and the size of the foreign reserves gave the BOK room to purchase gold last month,” Lee Jung, the head of the investment strategy team at the BOK’s Reserve Management Group, told reporters.

Lee declined to comment on future buying plans, citing their possible impacts on the market.

The BOK’s move came as the bleaker economic outlook and the protracted euro zone debt crisis raised investors’ appetite for safe assets.

The additional purchase put Korea at the 40th spot in the world in terms of gold holdings as of end-July, up from the 43rd ranking the previous month, the BOK noted.

Amid ample liquidity, gold is widely viewed as a way to hedge inflation risks and a brittle global economic outlook is making gold bullion more attractive as a safe asset.

The BOK has been making efforts to diversify its foreign exchange reserves by curtailing the portion of its U.S. dollar-denominated assets.

Gold bullion accounted for 0.9 percent of the total reserves as of the end of July, up from 0.7 percent the previous month. Korea’s foreign exchange reserves rose in July mainly because investment profit increased, the BOK noted.

Korea’s foreign exchange reserves totaled $314.35 billion as of the end of July, up $1.97 billion from the previous month.

Yonhap