South Korean central bank not to increase gold reserves

South Korea’s central bank does not plan to buy more gold for its foreign exchange reserves, although the monetary authority has not purchased the precious metal at all for the last decade, an official said on Friday.

“We do not consider buying gold for asset allocations,” said the Bank of Korea’s reserve management group official. “Gold is not a profitable asset, making itself less attractive for investments than US government bonds.”

The Bank of Korea held 104.4 tons of gold as of end-2023, the 36th-largest among gold holdings of global central banks, according to the World Gold Council. The Federal Reserve topped the list as the US central bank held 8,133.5 tons, followed by Germany with 3,352.6 tons, according to data from the market development organization for the gold industry.

The South Korean central bank has been maintaining its gold holdings since it bought 90 tons in 2011-2013 to diversify its foreign exchange reserves by reducing the US dollars. Gold made up only 1.7% of the Asian country’s foreign exchange reserves as the Bank of Korea has not bought the precious metal since then.

MAY HAVE TO INCREASE GOLD TO RAISE SAFER ASSETS

Some economists said the central bank needs to increase gold in its reserves to raise safer assets amid growing geopolitical conflicts worldwide.

China bought 215.9 tons last year amid the intensifying trade war with the US, while Poland, a neighbor of Ukraine invaded by Russia, purchased 130 tons.

The Bank of Korea keeps its gold holdings as 8,380 gold bars of 11-13 kilograms in Bank of England vaults.

The Asian country’s central bank, which had stored its gold at home and the Federal Reserve Bank of New York in the 1990s, moved the asset to London, a global gold trading hub, to trade it, exchange it into dollars or profits through lending.

Write to Jin-gyu Kang at josep@hankyung.com
 

Jongwoo Cheon edited this article.