MC:Bank of Korea buys gold for first time since '97-'98 crisis
South Korea's central bank bought gold for the first time in more than a decade as global growth and debt uncertainties encourage monetary authorities around the world to diversify foreign reserves.
A brittle global economic recovery and precarious debt conditions in the United States and Europe have boosted the safe-haven appeal of gold, lifting bullion to a series of record highs in July, as investors and central banks chased prices higher.
The Bank of Korea said in a statement on Tuesday it bought 25 tonnes of gold over the past two months, raising its gold holding to 39.4 tonnes, or 0.4% of its total reserves.
The increased holding remains far smaller than that of other Asian central banks, with China, which ranks sixth globally, the biggest among Asian banks with 1,054.1 tonnes, equivalent to 1.6% of its entire reserves, by the end of May, the World Gold Council says.
Japan, No 9 globally, has 765.2 tonnes of gold, or 3.3% of its total reserves, and 11th-ranked India has 557.7 tonnes, or 8.7%.
"South Korea's central bank seems a little late to the party, but gold investors should continue to expect price support as central bankers around the world are underinvested in the yellow stuff," said Sean McGillivray, head of asset allocation at Great Pacific Wealth Management.
"Investors and central bankers are looking to protect purchasing power, (by) diversifying into the currency of last resort, gold."
With prices hovering near historic highs, the central bank of Asia's fourth-largest economy said gold looked less lucrative as an investment, but it was the right time to buy the precious metal because its foreign reserves had risen above USD 300 billion.
The news barely moved gold prices, with spot up just 0.1% at USD 1,620.24 an ounce by 0253 GMT, although analysts said it was supportive of prices. Gold hit a record high of USD 1,632.30 on Friday.
"Any news about central banks buying gold reassures consumers and other major players who are already looking at gold as an investment," said Jeffrey Pritchard, analyst at California-based commodities futures and options brokerage Altavest Worldwide Trading.
