South Korea buys gold; central bank purchases set to rise

Reuters ^ | Thu Aug 2, 2012 5:55am EDT | By Christine Kim and Rujun Shen

[DeaconBenjamin]

South Korea boosted its gold holdings by nearly a third in July, buying 16 tonnes to diversify its massive foreign exchange reserves.

South Korea's central bank said it now holds 70.4 tonnes of gold, after paying $810 million last month for the purchase.

The increase supported expectations that central banks will remain gold's key buyer as increased volatility in global markets and waning confidence in the U.S. dollar fuel a global drive to divest from the U.S. currency and government debt securities.

The Bank of Korea paid about $1,582 per ounce on average, slightly lower than the average spot gold price of about $1,592 for the month.

Gold prices gained nearly 1 percent in June, and hovered near $1,620, down about 16 percent from the record high above $1,920 hit last September.

CENTRAL BANKS TO BUY MORE GOLD

In the last 13 months, South Korea's gold reserves have grown five-fold but remain only a fraction of China's over 1,000 tonnes and Japan's 765 tonnes, according to the World Gold Council (WGC).

Central banks bought 80.8 tonnes of gold in the first quarter, adding to 2011 purchase of more than 450 tonnes, the WGC said. In recent months, Russia and Kazakhstan also increased their gold reserves, data from the International Monetary Fund showed.

Gold now accounts for 0.9 percent of the value of South Korea's total foreign reserves at the end of July, up from 0.7 percent a month earlier, the central bank said. The total book value of its gold holdings was at $3.0 billion, it added.

South Korea's foreign reserves of more than $300 billion ranked the seventh in the world.

The South Korean central bank said it ranks 40th in the world in gold holdings, up from 43rd in June.

[DeaconBenjamin]

What idiots! They need to be investing in Facebook and Government Motors, not some barbaric relic! /sarc

[allendale]

Take this from the perspective of the Asians. They have witnessed the West for the past three generations squandering capital by consuming more than they produce, accumulating non sustainable debt,and still continue to spend and create unfunded entitlements. The West’s financial gurus concoct all sorts of financial gimmicks to continue the nonsense. Yet the West’s economies are contracting, the culture is becoming more decadent, less fertile and eventually its money will be worth less, a lot less. Gold has to look good as a long term investment. Also would you want to be the Chinese central bankers who have to explain to Party goons just why you continued to hold two trillion in US treasury notes that have declined in value?

[ChildOfThe60s]

South Korea's foreign reserves of more than $300 billion ranked the seventh in the world and were equivalent to about 30 percent of its annual gross domestic product.

30% of GDP. Contrast that with the *official claimed* holdings of the US government. Shooting from the hip, I recall that (if the FED is telling the truth) the US has something like $400 billion in gold. What is our GDP? Around $15 Trillion, give or take a few hundred billion. How's that work out? Less than 3%. Yeah, we're prepared.