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South Korea Adds to Gold Reserves

Release Date: 
Wednesday, March 6, 2013

Gold rose for the third straight day on central bank buying and physical demand.  Gold traded $4.70 higher at 11:29 a.m. Pacific Time on the New York Spot Market, at $1,581.10 per ounce.  Spot silver was $0.22 higher at $29.02 per ounce.  (Click here for the most current spot prices.)

The Bank of Korea added 20 tons of gold to its reserves in February, an increase of 24 percent.  “The Bank of Korea’s gold buying is part of the long-term diversification of currencies and assets in foreign-exchange reserves,” the South Korean bank said in the statement. “It is of no great importance to try to gauge if it’s profitable or not based on short-term price swings.”

David Lennox, a resource analyst at Fat Prophets, agreed, noting that “central banks really don’t worry too much about the gold price…What they are more concerned about is making sure that they get a good balance in their reserve portfolios

The World Gold Council expects central banks to remain strong buyers this year after increasing purchases in 2012 by the most in almost five decades.  Russia’s Bank Rossi, one of the largest gold buyers, increased its reserves for a fourth straight month in January.

Expectations of easy monetary policies also continue to bolster gold, with analysts eyeing the European Central Bank meeting on Thursday.  “The stimulus story is not over as yet,” said Bill O’Neill, a partner at Logic Advisors. “Also, physical demand has shown some signs of improvement.”

Investors in India and China, the world's two largest gold consuming nations, are buying gold after prices fell over recent weeks, a UOB Kay Hian senior analyst said. Recent record gold exports to China from Hong Kong pointed to robust physical demand for the metal, she said.  Hong Kong's net gold exports to mainland China rose 47% in 2012 to 557.48 tons.

(Sources:   “Korea Joins Russia, Kazakhstan in Boosting Gold Holdings,” Bloomberg, March 6, 2013; “Gold Futures Gain forThird Straight Day on Stimulus Speculation,” Bloomberg, March 6, 2013;  “Gold Higher in Asia on Physical Demand; Precious Metals Higher,” Wall Street Journal, March 4, 2013)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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