Korea lags behind in gold holdings

The country`s gold holdings falls far behind economies of similar size, recording a shortfall of 14.3 metric tons as of the end of 2009 despite a 0.1-ton increase in the second half, the Ministry of Strategy and Finance said yesterday.

The amount translates to a 0.2 percent of the country`s foreign exchange reserves, which some analysts called "almost negligent" compared to 70.4 percent, the U.S. equivalent.

"The price of gold increased by more than five fold over past the decade but the Bank of Korea hasn`t done much to take advantage of it. We need to buy more gold to diversify away from a weakening dollar," said Rep. Lee Hye-hoon of the Grand National Party.



Bank of Korea governor Lee Seong-tae, however, reasoned the small amount of gold holdings is due to "dramatic price fluctuations" and makes it an inappropriate alternative to the country`s dollar reserves.

According to the Finance Ministry, Korea entered at 56th among the 113 countries the World Gold Council reported in June 2009. It now stands at 57th.

The United States topped the list with 8,133.5 tons of gold holdings followed by Germany and the International Monetary Fund with 3,406.8 tons and 3,005.3 tons each. The large amount of gold in the United States allows quick use of them in cases of emergencies such as a war.

China and Japan also made it to the top ten with 1,054.1 and 765.2 tons of gold holdings respectively.

Brazil, Mexico and Canada are other major economies with less than one percent of gold holdings as part of their foreign exchange reserves.

"It is not necessarily good to have a high ratio of gold holdings. But we still think that the financial crisis has proved that gold is one of the very attractive investment assets and the government is cautiously considering additional gold purchases by closely watching other nations` moves," an official said on condition of anonymity. (cynthiak@heraldm.com)





By Cynthia J. Kim