South Korea’s central bank bought gold-related assets for the first time in 13 years, joining global reserve managers turning to the precious metal as a hedge against geopolitical and economic uncertainty.
The Bank of Korea held 679,765 shares of SPDR Gold Shares worth about $250 million at the end of the second quarter, according to a filing with the US Securities and Exchange Commission. It did not hold any shares of the world’s biggest physically backed gold exchange-traded fund three months prior, the filing showed.
The investment marked BOK’s first gold-linked purchase since 2013, the central bank said. The purchase doesn’t add to its official bullion holdings as Gold ETFs are classified as securities and form part of the foreign-exchange reserves.
“The Bank of Korea’s allocation to gold is quite low,” said Choi Kyuho, an economist at Hanwha Investment & Securities Co. “From the standpoint of aligning with global standards, there is room for the BOK to make additional gold purchases. I think they will move toward increasing their gold holdings.”
Central banks globally have stepped up their accumulation of bullion, seeking diversification and safe-haven assets to hedge against geopolitical and financial risks. Monetary authorities bought a net 289 tons of gold in the three months ended June, a record amount for a second quarter, according to the World Gold Council.
The BOK has sat out that buying spree, with its physical gold holdings unchanged at about 104.4 tons since its last purchases in 2013.
Earlier this month, the BOK said it would establish a framework to buy gold refined in South Korea. The bank’s first such move in almost six decades is intended to diversify gold purchase sources and support a gradual increase in the metal’s share of its foreign-exchange reserves, it added.
Investments in ETFs give the BOK exposure to gold without directly expanding its physical bullion stockpile, while offering greater liquidity and ease of trading. The distinction is significant for reserve management: physical gold is generally held as a long-term reserve asset, while an ETF can be bought and sold like other financial securities.
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