Korea's Central Bank to Buy Gold Amid Geopolitical Risks

The Bank of Korea (BOK) is set to buy physical gold for the first time in 13 years, citing rising geopolitical risks and increased interest in safe-haven assets. The central bank will purchase domestically produced gold, with export volumes totaling 4-5 tons per year.

This marks a change from 2013, when the BOK last made physical gold purchases. Between 2011 and 2013, it bought a total of 90 tons, lifting its holdings to 104.4 tons. However, it then halted additional purchases, leaving gold at just 3.5% of its foreign-exchange reserves.

According to the BOK, the move is aimed at increasing the share of gold in its foreign-exchange reserves over a medium- to long-term period. To achieve this, the central bank has established a cooperation framework with LS MnM, the Korea Exchange, and the Korea Securities Depository to build the necessary infrastructure.

The BOK will use negotiated block trades on the Korea Exchange's gold market to prevent price volatility in the domestic exchange market. The custody and settlement of the gold will be handled by the Korea Securities Depository.