Bank of Korea rules out immediate gold buying, may consider it long-term

South Korea's central bank may consider buying more gold only in the mid- to long-term, but is not thinking of immediately buying more after a recent surge in prices of the precious metal, a bank official said on Tuesday.

The bank's rare comments come after this month's record high of $2,431.29 an ounce in spot gold as growing Middle East tension drove investors to seek safe-haven assets. The metal has risen 13% this year, building on a gain of 13% in 2023.

"We don't have any immediate plans to buy gold now," Kwon Min-soo, head of the Bank of Korea's reserve management group told Reuters, adding that numerous factors needed to be weighed to ensure the right circumstances for such purchases.

"Foreign exchange reserves must be on a sufficiently increasing trend, and the foreign exchange market must be stable in order to 'consider' purchasing additional gold as an asset, which is why we would consider them only in the mid- to long-term," he said.

In a blog post earlier, the bank's Reserve Management Group said it needed to be cautious when investing in gold, but advantages offered by the precious metal included its role as a hedge against inflation and an alternative to the U.S. dollar.

Recent gains in gold prices were due mostly to purchases by central banks of countries such as China, Russia and Turkey, which are trying to become less dependent on the U.S. currency or guard against war, the bank said.

Current gold prices are widely seen as over-valued and there is a chance they will fall when speculative buying positions accumulated in the futures market are cleared, it added.

In June 2023, the BOK said it was more desirable to maintain dollar liquidity than boost its gold holdings, after its first inspection of gold holdings at the Bank of England.

The BOK holds 104.4 tonnes of gold in its foreign exchange reserves, or $4.8 billion, accounting for 1.1% of its total $419.3 billion in reserves at the end of March. It has not made any gold purchases since 2013. (Reporting by Jihoon Lee, Cynthia Kim; Editing by Clarence Fernandez)