Seoul :  The Bank of Korea, which has shunned adding gold to foreign-exchange reserves, is "under pressure" to consider purchases as the global economy worsens and the price advances, Shinhan BNP Paribas Asset Management said.

"Given that central banks in India, Russia and China have bought gold for defence, the Bank of Korea can't help but feel under pressure to consider purchases for diversification," said Oh Kyu Chan, Seoul-based head of the overseas fund of funds team at Shinhan BNP, which operates Korea's biggest gold fund. Kang Sung Kyung, a senior official at the bank's reserve-management department, had no comment yesterday on plans for gold purchases.

Gold is trading close to a record as signs the global recovery is sputtering prompt investors to seek to preserve their wealth. Gold "offers little value" and "isn't the trend," Lee Eung Baek said last year when he was head of the bank's reserve-management unit. The Bank of Korea's holdings rank 56th worldwide, according to the World Gold Council.

"The global economy is taking a turn for the worse," Oh said yesterday in an interview. "The declining values of the dollar and the euro, coupled with an economic downturn, mean the Bank of Korea should find other alternatives to invest. There are not many options," Oh said, without forecasting gold prices.

Immediate-delivery gold traded yesterday at $1,239.70 (Dh4,549.69) an ounce at 12.04pm in Seoul compared with June's all-time high of $1,265.30, and $1,158.10 on December 7, when the Bank of Korea's Lee made his comments. The metal has surged 13 per cent this year and is on course for a 10th annual gain.

South Korea's foreign-exchange reserves — the world's sixth-largest after China, Japan, Russia, Taiwan and India — rose to a record $286 billion in July.

Reserves

The Asian nation holds 14.4 metric tonnes of gold, equivalent to about 0.03 per cent of total reserves, according to figures from the Bank of Korea.

The World Gold Council, a producer-funded lobby group, estimates that as of June 2010, South Korea's gold holdings were the smallest in percentage terms of any of the top 100 holders apart from Hong Kong's and Canada's.

Goldman Sachs Group forecast earlier this month that gold may climb to $1,300 an ounce within six months on renewed investor interest.

The metal advanced this week after US housing data reinforced speculation that the world's largest economy may face a double-dip recession.

Bank Rossii, Russia's central bank, said on Aug. 20 that it added 500,000 ounces last month, increasing its stockpile to 23.3 million ounces.