BOK cautious about buying gold, opts for dollars

gettyimagesbank

By Yi Whan-woo

The Bank of Korea (BOK) remained cautious about buying more gold despite a recent buying spree of gold by central banks around the world to counter growing global economic unrest.

In a report released on Tuesday, the BOK instead assessed that it will opt for maintaining its dollar liquidity as a way to secure foreign exchange reserves.

“A cautious approach is necessary for determining whether to increase the ratio of gold in the foreign exchange reserves," the BOK said.

It also cited the uncertainty of gold prices, positive real interest rates, and the difficulty of selling gold for liquidity purposes as reasons for being prudent in buying more gold over dollars.

The BOK's view comes after central banks accumulated gold at the fastest pace on record in the first two months of 2023.

During the cited periods, central banks collectively bought a net 125 tons of gold, marking the highest amount for the year-to-date period since they became net buyers in 2010, according to the World Gold Council (WGC).

By country, the United States reported the largest amount in 2022, holding 8,133.46 tons. Germany came in second with 3,355.14 tons, followed by Italy with 2,451.84 tons, France with 2436.75 tons and Russia with 2301.64 tons.

Korea on the other hand stood in 36th place with 104.44 tons. The amount has remained unchanged since the first quarter of 2013.

The country's gold accounts for 1.14 percent of its $421 billion in foreign exchange reserves in total as of May. All of the gold possessed by the BOK is stored in the Bank of England.