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BOK's gold reserves remain at same level for decade
By Anna J. Park
Countries' demand for gold has risen to an all-time high level recently, as global preference for safer assets has increased amid soaring global interest rates, concerns over economic recessions and the ongoing war between Russia and Ukraine. Yet, despite the global gold frenzy, Korea's central bank has not increased its holdings of gold for the past 10 years.
According to the World Gold Council (WGC) earlier this week, central banks around the world added a total of 1,135.7 tons of gold to their reserves in 2022. It is a record high of central banks' accumulated annual additions to their reserves since related records began in 1950. Last year's figure is also more than double the previous year's 450 tons of gold added to the reserves.
By countries, the U.S. has a total of 8,133.5 tons of gold, which accounts for 67.2 percent of its foreign reserves, as of the end of last year. The U.S. has been consistently increasing its holdings of the precious metal to prepare against a possible depreciation of the dollar. Germany, Italy, France and Russia are chasing the U.S. in terms of gold reserves, holding 3,354.9 tons, 2,451.8 tons 2,436.8 tons and 2,329.6 tons, respectively.
China is closely following the world's top five gold holders with 2,050 tons of reserves. Its central bank purchased 62 tons of gold in last year's fourth quarter alone, making its accumulated gold holdings exceed the 2,000-ton mark for the first time ever.
Countries' requests for gold have not been shrinking so far this year. The global demand for gold has risen by 28 percent this year alone, due mainly to increased demand for safer assets, according to a recent WGC report. Also, a quarter of the world's central banks surveyed by the WGC said they plan to extend their gold holdings within the next 12 months. Such strong demand stoked the price of gold to over $2,000 per ounce this month.
BOK avoids gold since failed investment in early 2010s
Despite the global frenzy over gold holdings, the Bank of Korea (BOK) seems to keep itself aloof. The aggregate amount of gold reserves held by the BOK has remained at the same level of 104.4 tons since 2013. It accounts for only about 1.4 percent of Korea's entire foreign reserves.
As a result, Korea's gold holdings are ranked 36th in the world, as of the end of last year, which is far below neighboring China, which holds 2,050 tons as the world's sixth-highest, and Japan, which holds 846 tons, the eighth-most.
This draws criticism that the central bank's avoidance of gold reserves should be shifted. The BOK purchased a total of 90 tons of gold over two years from 2011 to 2013 amid global gold price hikes and European sovereign debt crises. However, the price of gold plunged following the BOK's addition of gold into its reserves. After receiving criticism for the failed investment, the BOK has not since attempted to increase its holdings.
It still does not seem to have changed its stance on gold.
"The main reason that the BOK hasn't increased its gold holdings since 2014 was because the price of gold had fallen further and remained at a low level," BOK Governor Rhee Chang-yong said during a National Assembly session early this year. "While the price of gold is beginning to pick up this year, I think it's more desirable to hold assets that yield interest rates, rather than increasing holdings of gold that are highly volatile in price."
BOK officials explain that gold's price volatility is not very suitable for a central bank, which should invest in safe assets. Also, gold requires additional storage fees, which increases its costs.
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