BOK Reenters Gold Market After 13-Year Absence

The Bank of Korea has made its first gold investment in 13 years by quietly purchasing $250 million worth of gold ETFs in the second quarter, according to a recent filing with the U.S. Securities and Exchange Commission.

This move marks the bank's return to the global central bank gold-buying camp after a 13-year hiatus, during which time it had accumulated 104.4 tons of physical gold. The Bank of Korea's official statements suggest that gold ETFs are classified as foreign securities and included in foreign exchange reserves, rather than in official gold holdings.

The distinction between gold ETFs and physical gold is crucial for reserve management, with the former offering higher liquidity and more convenient trading mechanisms compared to the latter. By building a position through ETFs, the Bank of Korea has effectively added exposure to gold price fluctuations to its foreign exchange reserves without altering the statistical methodology for its official gold reserves.

This strategic shift comes as global central bank gold purchases reached a record high of 289 tonnes in the second quarter, with many institutions increasing their gold reserves in response to rising geopolitical risks and inflation uncertainty. Choi Kyuho, an economist at Hanwha Investment & Securities, commented that the Bank of Korea's current allocation to gold is relatively low and there is room for further purchases.