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S.Korea "Under Pressure" to Buy Gold

SOUTH KOREA is coming "under pressure" to consider Buying Gold for its central-bank reserves according to a leading Seoul-based fund manager.

"Given that central banks in India, Russia and China have bought gold for defense, the Bank of Korea can't help but feel under pressure to consider purchases for diversification," reckons Oh Kyu Chan, a fund-of-funds manager at Shinhan BNP Paribas Asset Management Co. in Seoul.

Shinhan BNP runs Korea's largest Gold Investment fund, according to Bloomberg.

South Korea is East Asia's third largest economy behind China and Japan.

"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," Oh said in an interview Wednesday. "There are not many options."

Oh's view was refuted by a senior official at the Bank of Korea, which currently holds 14.4 tonnes of Gold Bullion, worth just 0.2% of its foreign exchange reserves – the smallest proportion in Asia outside Hong Kong.

But "There is a growing appetite" to Buy Gold amongst emerging countries, said the World Gold Council's George Milling-Stanley in an analysts' conference call on Wednesday.

Latest data from the WGC showed that, as a group, central banks were net buyers of Gold Bullion for the fourth quarter running in Apr-June 2010.

The gold research-and-marketing group revised 2009's net central-bank gold sales down to 29 tonnes from the 44 tonnes reported in February.

Managing director for government affairs, Milling-Stanley also pointed on Wednesday to a "dwindling appetite" for gold sales amongst Western Europe's larger gold-holding central banks. Sales by the 19 signatories to their Central Bank Gold Agreement – renewed last Sept. with an annual 400-tonne ceiling – amounted to just "a fraction of tonne".

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