South Korea, holder of the world’s fifth-biggest foreign exchange reserves, is considering buying gold to diversify its dollar-heavy portfolio following years of official scepticism about bullion.

Even a small realignment of South Korea’s reserves would have a powerful effect on the gold market. With just 14 tonnes of gold – or 0.2 per cent of its $290bn reserves – Seoul is one of the smallest holders of the metal among large economies.

The Bank of Korea has been dismissive of gold and Kim Choong-soo, governor of the central bank, said on Monday that record prices for the commodity and market volatility meant Seoul would have to tread carefully. “We need to give careful consideration to the matter of increasing gold volumes in the foreign reserves,” he told a parliamentary committee.