SEOUL, April 30 (Reuters) - South Korea's central bank is considering additional purchases of gold in the mid- to long-term as foreign exchange reserves grow, it said on Tuesday, after a recent surge in gold prices.
The bank's rare comments come after this month's record high of $2,431.29 an ounce in spot gold as growing Middle East tension drove investors to seek safe-haven assets. The metal has risen 13% this year, building on a gain of 13% in 2023.
"We will monitor the development of the domestic foreign exchange market and trends in the global gold market to determine the timing and size of gold investment," the Bank of Korea (BOK) said in an online blog post.
The bank's Reserve Management Group said in the post that it needed to be cautious when investing in gold, but advantages offered by the precious metal included its role as a hedge against inflation and an alternative to the U.S. dollar.
Recent gains in gold prices were due mostly to purchases by central banks of countries such as China, Russia and Turkey, which are trying to become less dependent on the U.S. currency or guard against war, the BOK said.
Current gold prices are widely seen as over-valued and there is a chance they will fall when speculative buying positions accumulated in the futures market are cleared, it added.
In June 2023, the BOK said it was more desirable to maintain dollar liquidity than boost gold holdings, after its first inspection of gold holdings at the Bank of England.
The BOK holds 104.4 tonnes of gold in its foreign exchange reserves, or $4.8 billion, accounting for 1.1% of its total $419.3 billion in reserves at the end of March. It has not made any gold purchases since 2013. (Reporting by Jihoon Lee; Editing by Clarence Fernandez)
