Bank of Korea Buys Gold – Hits New Record

Gold surged to a new all-time high this morning, touching $1,635 per ounce amid concerns that the United States eocnomy may be on the verge of a double-dip recession.

Helping to propel gold prices higher was news late yesterday that the Bank of Korea bought gold for the first time in 13 years.  The central bank of the fourth largest economy in Asia purchased 25 metric tons over the past two months.  According to Reuters, “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.”  Based on Reuters’ calculations, the central bank of Korea purchased the equivalent of 803,769 ounces – valued at roughly $1.24 billion using an average price of $1,543 per ounce.

Central banks became net buyers of gold bullion in 2010 after being net sellers for most of the decade.  Amid increasing worries over the integrity of paper currencies, many central banks in the emerging world have put a portion of their foreign exchange reserves into gold.  After being relegated to a barbarous relic for decades, gold has begun to re-emerge as a legitimate monetary alternative.

Steve Forbes, editor of Forbes, recently called for a gold-backed U.S. dollar.  While it is clearly a long-shot that gold will re-enter the official international monetary system in the near future, the Bank of Korea’s purchase shows that gold remains relevant and is still considered a strategic monetary asset.