The Bank of Korea invested $250 million (about 350 billion won) in gold exchange-traded funds (ETF) listed overseas in the second quarter of this year. It is the first time in 13 years since 2013 that the Bank of Korea has bought an asset related to gold.
According to a report the Bank of Korea filed with the U.S. Securities and Exchange Commission (SEC) on the 13th, the Bank of Korea held 679,765 shares of SPDR Gold Trust (GLD), one of the gold ETFs, as of the end of June.
Earlier, the Bank of Korea decided to increase the share of gold in its foreign exchange reserves. It judged that it needs to respond to geopolitical risks such as war. Another reason was the need to ease asset concentration, as the share of U.S. dollars in the foreign exchange reserves is 69.5%, exceeding the global average (56.8%).
The Bank of Korea has not purchased gold since 2013. It said returns are lower than stocks and immediate liquidation is difficult. After buying 20 tons in 2013, it also faced public criticism when gold prices fell.
The gold ETF the Bank of Korea bought this time is classified as marketable securities within the foreign exchange reserves, so its physical gold holdings do not increase. Current gold holdings are 104.4 tons, ranking 39th in the world. As of the end of June, gold accounted for 1.1% ($4.79 billion) of the foreign exchange reserves.
The Bank of Korea plans to start buying gold in earnest after the Korea Exchange (KRX) and Korea Securities Depository (KSD) establish a gold purchase system. Instead of the existing method of buying gold overseas and storing it locally, it plans to buy gold produced and exported by domestic companies LS MNM and Korea Zinc.