The Bank of Korea, South Korea's central bank, for the second time this year raised its holdings of gold in November as part of measures to diversify its portfolio of foreign exchange reserves.
In a statement on Friday, the bank said it purchased 15 tonnes of gold for $850 million in November, four months after it bought an initial 25 tonnes for $1.24 billion between June and July, its first over a span of 13 years.
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"We bought the gold as part of our diversification strategy and based on long-term investment considerations," Lee Jung, head of the investment strategy team at the Bank of Korea's Reserve Management Group, told reporters.
Lee declined to provide the gold's purchase prices as well as possible future buying plans, citing potential impacts on the market.
The Bank of Korea now owns a total of 54.4 tonnes of the yellow metal, valued at US$2.17 billion at the end of November.
The gold allocation in Bank of Korea's investment portfolio accounts 0.7 per cent of total reserves, growing from just 0.026 per cent in June. However, the figure is still relatively a small proportion of its $308.63 billion reserves, which was down $2.35 billion from October.
Gold purchases by central banks around the world have more than doubled by 114 per cent over the previous quarter. Figures from the Gold Demand Trends report for Q3 2011 by the World Gold Council showed the gold buying spree of central banks from China, Russia, Thailand and Mexico in the third quarter of 2011 alone revealed a hike of more than six times to 148.4 tons compared to a year ago.
Gold prices have risen 23 per cent so far this year. It retreated after hitting $1,923 per ounce in early September, but gained again to trade at $1,750 per ounce as investors' anxiety continue to deepen over the maddening eurozone debt crisis.
With central banks joining the scramble to buy the safe-haven yellow metal, demand and prices will ultimately push upward and could hit $2,000 per ounce in the next three to six months, even go beyond the inflation-adjusted high of $2,400 during 2012.