SEOUL The Bank of Korea (BOK) assesses it is more desirable to maintain its dollar liquidity than to increase gold holdings for foreign exchange reserves at this point, the central bank said.

"A cautious approach is necessary for determining whether to increase the ratio of gold in the foreign exchange reserves," the BOK's Reserve Management Group said on Tuesday.

Given the possibility of a global economic recession and underlying geopolitical risks, it a better to be ready to provide ample liquidity in dollars, the group said.

It also cited uncertainty of gold prices, which it said were near their latest peak, positive real interest rates, and difficulty of selling gold for liquidity purposes as reasons.

The BOK released the gold management policy along with the results of its first inspection of gold holdings on May 23.

It said the inspection at the Bank of England, where all of its gold holdings are stored, concluded without any major concerns other than some simple errors in refiner marks on three gold bars, which it said are frequent.

Because London is the hub of the gold market, the Bank of England is an obvious choice for storing gold, the BOK said, but it added that there was a need for regular inspections and that it might consider diversifying storage sites for safety.

The Bank of Korea holds 104.4 tonnes of gold in its foreign exchange reserves, or $4.8 billion, which account for 1.14% of its total $421 billion in reserves as of the end of May.

(Reporting by Jihoon Lee. Editing by Gerry Doyle)