– Bank of Korea Says It Boosted Gold Holdings in Foreign-Exchange Reserves (Bloomberg, Dec 2, 2011):
The Bank of Korea, which controls the world’s eighth-biggest foreign-exchange reserves, boosted gold holdings for the second time this year as investors sought safer assets amid Europe’s debt crisis.
The central bank bought 15 metric tons last month, boosting holdings to 54.4 tons, which is equivalent to 0.7 percent of its total reserves, Lee Jung, head of the investment strategy team at the bank’s Reserve Management Group, told reporters in Seoul.
Central banks are expanding reserves for the first time in a generation as the precious metal is in the 11th year of a bull market. Purchases of as much as 450 tons in 2011 may be repeated next year as Asian nations and emerging economies diversify their reserves, UBS AG said Nov. 30.
“They want to diversify,” Gavin Wendt, the founder and senior resource analyst at Sydney-based Mine Life Pty., said by phone today. Investors and “central banks are pretty nervous about all currencies, not just the U.S. dollar.”
Gold has risen about 23 percent this year, reaching an all- time high of $1,921.15 an ounce on Sept. 6 and beating equities, treasuries and other commodities. The U.S. dollar, which typically moves inversely to bullion, is down about 1 percent this year against a basket of six major (worthless fiat) currencies.
“We’re buying gold to improve profitability against risks,” the Korean bank’s Lee said. “This is part of our mid- and long-term strategy to diversify our portfolio and enhance efficiency of asset management.”
The Bank of Korea purchased 25 tons over a one-month period from June to July, the first purchases in more than a decade, joining other emerging-market countries in expanding gold holdings to guard against volatile currency movements and to diversify portfolios.
The World Gold Council said central bank purchases in the third quarter jumped more than sixfold to 148.4 tons and forecast buying for the year would reach as much as 450 tons. Russia, Kazakhstan, Colombia, Belarus and Mexico added a combined 25.7 tons of gold to reserves in October, according to data on the International Monetary Fund’s website.
Holdings in exchange-traded products reached a record 2,356 tons on Nov. 30 and were at 2,355.5 tons yesterday, according to Bloomberg data compiled from 10 providers.
South Korea’s foreign-exchange reserves fell by $2.35 billion from October to $308.6 billion at the end of November as the euro weakened against the dollar, the central bank said in a statement today.