Dow Jones is reporting that the Bank of Korea has announced that it has increased the amount of gold in its reserves for the second time this year.
The report states that they purchased 15 tons in several batches last month. The last purchase was back in June for a total of 25 tons.
It now has 54.4 tons in reserve. Even with the purchases this year, it still has only 1% of its total foreign exchange reserves in gold. The former amount was a mere 0.7%.
We do not know the actual price at which these purchases were made but there is no doubt in my mind that they occured on forays down into the zone near the $1600 level. This level has seen strong buying by assorted Central Banks for some time now and I see nothing that would cause this to change anytime soon.
The fact is that many of the banks that have been accumulating gold are doing so to both diversify their reserves and to provide confidence to investors world wide .
As traders/investors this is valuable information for us as it points to very strong downside support in gold with sizeable accumulation occuring among a group of market participants who are not buying the metal only to try to flip it for some sort of short term gain. They are buying because they see value in the metal at these prices.
