* Gold steady after Bank of Korea purchase
* Bank of Korea says it bought gold in June-July
* It declined to say if it plans to buy more gold
By Yoo Choonsik and Kim Yeonhee
SEOUL, Aug 2 South Korea's central bank bought
25 tonnes of gold over the past two months in its first purchase
in more than a decade, saying the time was ripe to boost its
gold holding, but markets barely moved on the news.
A brittle global economic recovery and precarious debt
situations in the United States and Europe have boosted the
safe-haven appeal of gold, lifting bullion to a series of record
highs in July, as investors and central banks chased prices
The central bank of Asia's fourth-largest economy said that,
with prices hovering near historic highs, gold looked less
lucrative as an investment but it was the right time to buy gold
because its foreign reserves had risen above $300 billion.
News of the Bank of Korea's purchase barely moved spot gold
which was steady at $1,617.89 an ounce by 2236 GMT, but
analysts said it was supportive of prices. Gold hit a record
high of $1,632.30 on Friday.
"Any news about central banks buying gold reassures
consumers and other major players who are already looking at
gold as an investment," said Jeffrey Pritchard, analyst at
California-based commodities futures and options brokerage
Altavest Worldwide Trading.
The Bank of Korea said in a statement its latest gold
purchase was valued at $1.24 billion. It did not say whether it
had bought gold bullion or funds.
At 25 tonnes of gold, equivalent to 803,769 ounces, the
average price paid comes to $1,543 an ounce, based on Reuters
A Bank of Korea official said it was the bank's first gold
purchase since at least the 1997-1998 Asian financial crisis.
"South Korea's central bank seems a little late to the
party, but gold investors should continue to expect price
support as central bankers around the world are underinvested in
the yellow stuff," said Sean McGillivray, head of asset
allocation at Great Pacific Wealth Management.
"Government austerity and a return to normalized monetary
policy will be the game changer for the gold bull market.
Investors and central bankers are looking to protect purchasing
power, but diversifying into the currency of last resort, gold."
The latest purchase lifted the central bank's gold holding
to 39.4 tonnes. The BoK said the increased gold holding would
put it in 45th position in the World Gold Council's list of
central banks holding gold, up from 56th previously.
The United States has the biggest gold holding in its
foreign reserves, at 8,133.5 tonnes, with China at No. 6 with
The BoK declined to disclose the purchase price but said it
had entrusted all of its gold holding to the Bank of England for
possible use in gold lending and other related transactions in
CONDITIONS RIPE FOR GOLD PURCHASE
During the 1997-98 Asian financial crisis, 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
"The country had too small an amount of foreign reserves to
diversify into gold before 2004 and was not able to buy gold
between 2005 and 2007 due to concerns about the central bank's
annual losses," the Bank of Korea said.
"Now that our total reserves topped $300 billion and foreign
exchange markets stabilised, we judged that conditions were ripe
for us to increase gold holding," it said.
The Bank of Korea would not say whether it plans to buy more
gold, adding that any comments could have an impact on global
Valued in U.S. dollars, the new purchase increased its gold
holding to $1.32 billion from a mere $0.08 billion previously,
the bank said. Still, this represents only 0.4 percent of the
country's total foreign reserves.
Including the gold, South Korea's foreign reserves rose by
$6.55 billion in July to $311.03 billion, equivalent to about 30
percent of the country's annual gross domestic product of just
more than $1 trillion in 2010.
Of the total reserves, 88.5 percent were invested in
securities, followed by 9.2 percent deposited at financial
institutions and 1.2 percent held as special drawing rights, the
Bank of Korea said.
South Korean foreign reserves ranked seventh in the world as
of the end of June, it added.
(Additional reporting by Manolo Serapio Jr. and Rujun Shen in
Singapore and Frank Tang in New York; Editing by Clarence
(Editing by Clarence Fernandez)