South Korea's Central Bank Buys Gold for First Time in 13 Years!

South Korea's central bank has restarted gold purchases after more than 13 years, marking a strategic reversal for an institution long hesitant to buy gold due to political pressures. The Bank of Korea announced it will increase the share of gold in its foreign reserves over the medium to long term and establish a new procurement channel for export-oriented gold sourced from domestic suppliers.

Simultaneously, the central bank has begun acquiring U.S.-listed gold-backed exchange-traded funds (ETFs). However, these ETFs are classified as securities in foreign reserve statistics, not as physical gold.

This move ends a 13-year gap in gold purchases that began in February 2013. Jeong Hee-seop, head of the Bank of Korea’s foreign reserve management division, stated that rising geopolitical risks have heightened market focus on gold’s safe-haven attributes, while the retreat of gold prices from recent highs has reduced price pressure, prompting the decision to expand gold holdings.

The Bank of Korea currently holds 104.4 tonnes of gold, ranking 40th among 100 countries tracked by the World Gold Council. However, gold accounts for only 3.5% of its foreign reserves, placing it 98th out of 100 nations—a stark mismatch with South Korea’s 13th-largest foreign reserve position globally.

This shift aligns with a broader global trend of central banks accelerating gold accumulation. Amid growing concerns over U.S. financial sanctions, central banks are expanding gold reserves to reduce reliance on U.S. dollar assets.

According to the World Gold Council, Poland’s central bank was the largest buyer from early 2024 to the end of July, purchasing 255.2 tonnes, followed by China with 96.1 tonnes. As of last month, the top gold reserve holders were the United States (8,134 tonnes), Germany (3,350 tonnes), Italy (2,452 tonnes), and France (2,437 tonnes). China and Russia, both reducing U.S. Treasury holdings, ranked fifth and sixth with 2,332 and 2,292 tonnes, respectively.

A recent World Gold Council survey of 74 central banks found that 45% (33 countries) plan to increase gold reserves within one year, and 60 countries expect their gold holdings to grow over the next five years. South Korea’s move is a clear signal of its integration into this global trend.