Bank of Korea Resumes Gold Purchases After 13 Years, Also Investing in Gold ETFs
nashnova research
The Bank of Korea has ended a thirteen-year freeze on gold buying and begun purchasing U.S.-listed gold ETFs — a formal pivot for a central bank long deterred by political backlash. Gold accounts for just 3.5% of its reserves, ranking 98th out of 100 countries.
Why did the halt last thirteen years?
Under former Governor Kim Joong-soo (2011–2013), the BOK built its gold holdings to 104.4 tonnes. Then gold prices fell, and the bank faced fierce criticism in a November 2013 parliamentary audit.
Lawmaker Kim Hyeon-mi accused the BOK of "failing to anticipate the gold-price decline, causing losses for the nation." Purchases were frozen on the spot.
This means → the halt was not a bearish call on gold — it was political risk aversion. A former senior official said the bank shifted into U.S. equities instead.
What does a 3.5% gold share really mean?
South Korea's foreign reserves rank 13th globally, yet gold makes up just 3.5% — 98th out of 100 countries, above only Chile and Colombia.
In plain terms = Korea has a deep reserves chest, but it is almost entirely in dollar assets. The gold safety cushion is paper-thin.
This reflects a structural imbalance built up over a decade of political paralysis — and recent geopolitical turmoil, combined with other central banks' moves, has broken the internal consensus to keep waiting.
Gold is down 20% from its peak — why act now?
Gold hit $5,020 per troy ounce in February, then pulled back to $4,050 on August 3 — a drop of roughly 20%.
Even so, the current price is about 150% above the $1,627 level when the BOK stopped buying in February 2013, implying a compound annual return of roughly 8%.
This means → in hindsight, the "politically safe" decision to stay out cost Korea 8% annualised over thirteen years. The pullback gave the bank a face-saving entry window.
What is new about the buying channels?
The BOK introduced a domestic procurement mechanism for the first time: buying gold refined by Korean firms LS MnM and Korea Zinc, with custody handled by the Korea Securities Depository.
All 104.4 tonnes currently sit at the Bank of England. The new setup aims to diversify storage locations and reduce geopolitical concentration risk.
In plain terms = the gold bars used to be entirely in London; now some will be kept closer to home — unusual for a non-gold-producing country. Only the Philippines and Mongolia do something similar.
Where does Korea stand in the global gold rush?
From 2024 through July this year, central-bank gold purchases were led by Poland at 255.2 tonnes, followed by China (96.1 t) and India (76.9 t).
A World Gold Council survey of 74 central banks found 45% plan to add gold within a year; 60 countries expect holdings to keep rising over the next five years.
This means → Korea is not chasing a trend — it is catching up on homework deferred for thirteen years. The scale and pace of future purchases will be the market's key test of how serious the commitment is.
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