The Bank of Korea said in a statement on Tuesday that it bought 25 metric tons of gold over the past two months, raising its gold holding to 39.4 tons, news that helped lift spot gold by around $6 from late on Monday.
Reserve currencies, like the dollar and euro, "have been losing their clout since the recent global financial crisis partly due to abnormal monetary policy adopted in many countries and fiscal deficit problems," said an official at the central bank who declined to be named.
South Korea's gold holdings remain far smaller than that of other Asian central banks, with China, which ranks sixth globally, the biggest with 1,054.1 tons as of the end of May, according to World Gold Council data.
Japan, No. 9 globally, has 765.2 tons of gold, or 3.3 percent of its total reserves, and 11th-ranked India has 557.7 tons, or 8.7 percent.
The Bank of Korea said its latest gold purchase was valued at $1.24 billion. It did not say whether it had bought gold bullion or funds, or whether it planned to buy more gold.
The purchase comes weeks before the central bank is due to face an annual parliamentary audit, expected in September, and after several South Korean lawmakers from both the ruling and opposition parties have repeatedly called for it to boost holdings of gold to diversify reserves. At 25 tons of gold, equivalent to 803,769 ounces, the average price paid comes to around $1,543 an ounce.
A Bank of Korea official said it was the bank's first gold purchase since at least the 1997-98 Asian financial crisis when patriotic Koreans collected the precious metal as part of a campaign to boost the country's foreign reserves, when it was on the verge of a sovereign default.
The United States has the biggest gold holding in its reserves, at 8,133.5 tons, or 74.7 percent of total reserves, according to the WGC's July report. Germany is a distant second with 3,401 tons, or 71.7 percent of its total reserves.
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