Bank of Korea Resumes Gold Investment After 13 Years With $250 Million ETF Purchase

The Bank of Korea has bought gold-linked assets for the first time in 13 years.

Bloomberg reported on Aug. 13 that the BOK held 679,765 shares of SPDR Gold Shares, the world’s largest physically backed gold exchange-traded fund, at the end of the second quarter. The stake was worth about $250 million. It held none of the ETF at the end of the first quarter.

The central bank said the investment was its first purchase of gold-linked assets since 2013. The gold ETF is classified as a security and included in foreign-exchange reserves, so it is not counted in the BOK’s official gold holdings.

The BOK’s physical gold holdings have remained at about 104.4 metric tons since its last purchase in 2013. A gold ETF allows the central bank to gain exposure to gold prices without increasing physical holdings. It can also be traded relatively easily, like other securities, when needed.

The purchase comes as central banks around the world expand gold holdings to guard against geopolitical and economic uncertainty. The World Gold Council said central banks made net purchases of 289 tons of gold in the second quarter, the largest total ever for that period.

Earlier in August, the BOK said it would set up a system to buy gold refined in South Korea. The move to purchase domestically refined gold would be the first in about 60 years. It is intended to diversify procurement channels and gradually raise gold’s share of foreign-exchange reserves.

Choi Kyu-ho, an economist at Hanwha Investment & Securities, said the BOK’s allocation to gold remains very low. He said the central bank has room to make additional purchases as it moves closer to global standards and is likely to increase its gold holdings over time.