Bank of Korea Revives Gold Purchases After 13-Year Absence

The Bank of Korea (BOK) has announced it will resume purchasing physical gold for the first time in 13 years. The central bank plans to buy domestically produced gold through over-the-counter transactions, utilizing existing trading and settlement infrastructure. This approach offers advantages such as enhanced currency hedging effects and storage within South Korea.

The BOK's decision comes after a period of cautiousness regarding additional gold purchases due to lower liquidity and higher volatility compared to stocks or bonds. However, with heightened geopolitical risks increasing interest in safe-haven assets like gold, the bank has shifted its stance. The proportion of gold in the BOK's foreign exchange reserves is smaller compared to other countries.

The actual timing and scale of the purchases have not been determined, but the BOK will consider various preparations related to gold trading, export plans, and its own gold management plans. This marks a significant change for the central bank, which had previously maintained a cautious stance on gold purchases.