Central bank stocks up on gold as price erodes

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Central bank stocks up on gold as price erodes

The Bank of Korea increased gold holdings 24 percent last month to diversify investments, joining its peers in boosting bullion reserves even as prices fell.

The bank added 20 metric tons in February, raising the total to 104.4 tons, it said yesterday. By value, holdings increased about $1.03 billion to $4.79 billion at the end of February, equivalent to 1.5 percent of total reserves, according to the statement.

Bullion slipped for the fifth straight month in February, the longest losing streak since 1997, as investors cut holdings in exchange-traded products amid improved economic data and gains in equities. The Korean purchases came after Russia and Kazakhstan expanded bullion reserves for a fourth straight month in January. Central banks will again be strong buyers this year after boosting purchases 17 percent to 534.6 tons last year, the most since 1964, according to the London-based World Gold Council.

“The Bank of Korea’s gold buying is part of the long-term diversification of currencies and assets in foreign-exchange reserves,” it said in the statement.

Gold for immediate delivery fell 5.7 percent in the two months through February and on Feb. 21. touched $1,555.55, the lowest level since July.

The cycle for gold prices, which rose for 12 straight years, has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, Goldman Sachs Group said. The bank cut its three-month target to $1,615 an ounce from $1,825 and lowered the six- and 12-month forecasts to $1,600 and $1,550.

The Bank of Korea’s latest buying follows its purchases of 30 tons in 2012 and 40 tons in 2011. Russia boosted holdings by 12.2 tons to 970 tons in January after gaining 8.5 percent over 2012, according to International Monetary Fund data. Kazakhstan’s hoard rose 1.5 tons to 116.8 tons, following last year’s 41 percent expansion.

Bullion holdings in ETPs dropped to 2,500 tons as of March 4, the lowest level since September, according to data compiled by Bloomberg. The holdings reached an all-time high of 2,632.5 tons on Dec. 20, the data show. Bloomberg
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