BOK to Buy $140 Million in Domestic Gold by Year-End

The Bank of Korea is set to buy $140 million worth of domestically produced gold this year, its first physical gold purchase in 13 years. The central bank plans to acquire around one ton of gold by December 14, with the necessary systems expected to be in place at that time.

The decision follows a previous indirect investment through exchange-traded funds (ETFs) in the second quarter, which saw the BOK purchase $250 million worth of gold ETFs. This move is seen as a step towards diversifying the country's foreign exchange reserve portfolio and building up safe-haven assets.

The BOK's gold holdings currently fall short of those in major economies, with the central bank holding 104.4 tons of physical gold worth $4.79 billion on a book value basis. This accounts for just 1.1% of total foreign exchange reserves or about 3.4% at market prices.

The Bank's Reserve Management Group is expected to oversee the purchase, which will be made in Korean won rather than foreign currency. This approach allows the BOK to minimize volatility in the domestic foreign exchange market and build up safe-haven assets without dollar outflows.