By Kim Tae-gyu
Staff Reporter
Lawmakers argue that the country's central bank is required to raise the proportion of gold in its foreign exchange reserves because the value of gold is increasing rapidly.
Rep. Lee Hye-hoon from the governing Grand National Party (GNP) made the point Thursday during the annual parliamentary inspection of the Bank of Korea (BOK).
``The value of gold jumped five-fold over the past 10 years from approximately $250 per ounce in 1999 to more than $1,000 per ounce of late to renew a record high,'' Lee said.
``In line with the appreciation of gold as well as the weakening dollar, many nations have increased the proportion of gold in their foreign exchange reserves. However, the BOK failed to do so,'' she said.
The BOK currently holds about 14 tons of gold that account for merely 0.2 percent of its aggregate foreign exchange reserves, which amount to $254.3 billion, the sixth-largest in the world.
This pales in comparison to Western countries such as Portugal with 90.9 percent, the United States with 77.4 percent, France with 70.6 percent and Italy with 66.6 percent.
Asian countries tend to have less gold but their amounts are still substantially higher than that of Korea. For example, the proportion is 3.9 percent for Taiwan, 2.3 percent for Japan and 1.9 percent for China.
``At a time when the dollar continues to weaken, the BOK should hoard more gold to diversify its portfolio of foreign reserves, like China and Russia have been recently trying to do,'' Lee said.
Rep. Baek Jae-hyun of the opposition Democratic Party partially concurs.
``We have turned a blind eye to gold as we have not had debates on key currency. We need to create a long-term plan, though I do not think that the country should abruptly increase the proportion of gold right away,'' he said.
Rep. Lee Jong-koo from the GNP took issue with the foreign reserve portfolio dominated by the greenback.
``About 65 percent of our foreign reserves are dollars. This is too much. We need to trim down on the rate of dollars,'' he said.
In response, the BOK remains negative about the proposals.
``European central banks continue to slash their amount of gold reserves and so do a majority of Asian central banks, with the exception of China,'' the BOK said in a report to the National Assembly.
``Because gold prices appreciated too much, we cautiously keep a tab on the market,'' it said.