South Korea raises gold reserves amid global fears

SEOUL: South Korea's central bank said Friday it has increased the amount of gold it holds as it moves to hedge against global volatility caused by European and US debt crises.

The Bank of Korea said it bought 15 tons of the precious metal from the London gold market last month, bringing its total reserves to 54.4 tons at the end of November.

It is the second time it has bought gold to diversify its foreign exchange reserves this year. It purchased 25 tons of gold between June and July -- its first purchase since the 1997-98 Asian financial crisis.

The bank said its gold holdings account for one percent of its foreign-exchange reserves, which stood at $308.63 billion at the end of November, the eighth largest in the world.

"Demand for gold is increasing as a hedge against global inflation amid the persistent sovereign-debt crisis in Europe," Lee Jung, head of the bank's reserve-investment strategy team, said, according to Dow Jones Newswires.

"The gold purchase will help us cope with volatile global financial markets and enhance investor confidence in Korea in times of crises."

Asian governments have become increasingly concerned about the problems in the West, with European leaders struggling under the weight of a crippling sovereign debt crisis that threatens the end of the eurozone.

And in the United States lawmakers have been unable to agree a plan to bring down the country's titanic deficit, which sits at more than $15 trillion.

The ongoing woes has led to forecasts of further gold purchases, especially from Asia.

Gold has become increasingly attractive to central banks worldwide, and prices have risen sharply since the global financial crisis as it is considered a safe haven while a weaker dollar makes it even more attractive.

The yellow metal has more than doubled since the 2008 meltdown and soared to almost $2,000 an ounce earlier this year, although it has weakened slightly as the dollar has strengthened against the troubled euro.

European central banks have stopped selling gold. China, which has the

world's biggest foreign-currency reserves, has been increasing its gold holdings mainly through domestic producers.