The Foreign Reserves Management Group at the Bank of Korea (BOK) is reviewing investing in overseas-listed spot gold exchange-traded funds (ETFs).
On the 28th, an official at the Bank of Korea (BOK) Foreign Reserves Management Group said in a phone call with ChosunBiz, "We are looking into the possibility of investing in spot gold ETFs," adding it is "part of routine reviews of investment destinations in the course of managing foreign-currency assets." The official added, "Nothing has been decided."
The Bank of Korea (BOK) has so far maintained a cautious stance on gold-related products while building its foreign-currency asset portfolio around advanced-economy stocks and bonds. The central bank cited the lack of cash flow such as interest or dividends from gold, and its relatively lower liquidity and marketability, which reduce management efficiency.
However, as international gold prices have recently strengthened, the environment surrounding gold is also changing. After repeatedly hitting a record high last year, the international gold price has continued to climb recently, topping $5,200 per troy ounce.
The Bank of Korea (BOK) also appears to be reviewing spot gold ETF investments amid this trend. Spot gold ETFs track the price of physical gold while allowing immediate transaction in the market, making them a more marketable alternative to direct investment in gold.
If an investment in spot gold ETFs materializes, the Bank of Korea (BOK) would purchase a gold-related financial product for the first time in 13 years. The bank bought 20 tons of gold in 2013 but halted additional purchases after controversy arose over "losses on gold investments" due to a decline in gold prices. It has not purchased additional gold since.