South Korea's central bank has resumed gold-linked investments after a 13-year hiatus, purchasing 679,765 shares of SPDR Gold Trust worth approximately $250.41 million at the end of the second quarter. According to a filing with the US Securities and Exchange Commission, the Bank of Korea held no shares of the world's biggest physically backed gold exchange-traded fund three months prior to this purchase. This marks the central bank's first gold-linked purchase since 2013, as reported by the Bank of Korea. The move represents the first time the Bank of Korea has invested in a gold-related ETF, signaling a significant shift in the country's monetary policy approach as global central banks increasingly turn to gold as a hedge against geopolitical and economic uncertainty.
The ETF position is currently valued at more than 350 billion won ($247.7 million) as of the second quarter, with the ETF trading at approximately $404.9 per share as of the latest data. This represents a rebound from the $360 range where it fell in mid-July before recovering this month. The Bank of Korea's latest SEC filing shows a $250 million gold ETF position that accounts for roughly 6.4% of its total disclosed portfolio, which is valued at $3.89 billion in total holdings. The central bank did not disclose when it purchased the ETF but held no shares at the end of the first quarter. Gold ETFs provide investors with exposure to gold by tracking changes in the price of the precious metal, allowing them to benefit from gold price movements without owning the physical asset. 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, offering greater liquidity and ease of trading.
The gold ETF investment doesn't add to the Bank of Korea's official bullion holdings, as Gold ETFs are classified as securities and form part of the foreign-exchange reserves. As noted by Choi Kyuho, an economist at Hanwha Investment & Securities Co., the BOK's allocation to gold remains quite low compared to global standards. The economist suggests there is room for additional gold purchases to align with global standards and anticipates the bank will move toward increasing its gold holdings. The central bank clarified that "since the ETF itself is recognized as a marketable security, it does not affect the gold share in foreign exchange reserve statistics," according to the latest SEC filing. The BOK has sat out the global buying spree, with its physical gold holdings unchanged at about 104.4 tons since its last purchases in 2013. However, earlier in August, the central bank announced plans to purchase domestically produced gold intended for export, marking the first such move in almost six decades.
While the Bank of Korea resumed gold investments, other central banks demonstrated unprecedented demand for the precious metal. According to the World Gold Council, central banks combined added a net 289 tons in the three months through June, marking the strongest second quarter ever recorded. Poland led with 51 tons, while China added about 20 tons in July alone. The Bank of Korea sat out this global buying spree, with its last physical purchase coming in 2013 when it added 20 tons. Investor demand has also turned favorable, with gold-backed funds pulling in $3 billion in July, ending a two-month outflow streak. Whether the BOK expands from ETF exposure into physical bullion will be determined in future reserve reports, as the central bank has yet to decide when to resume purchases of physical gold.
