The Bank of Korea Plans to Purchase Gold Bars for the First Time in 13 Years

August 3rd, the Bank of Korea announced on Monday that it will collaborate with LS MnM Company, the Korea Exchange (KRX), and the Korea Securities Depository (KSD) to purchase domestically produced gold through OTC trading for the first time in 13 years. This decision was made due to the increased geopolitical risks, highlighting the necessity of diversifying South Korea's foreign exchange reserves.

LS MnM and Korea Zinc Company produce approximately 40 to 45 tons of gold per year as a by-product of smelting, with about 10% of it being used for export. The central bank stated that if the relevant companies apply, they will consider utilizing the trading and settlement system of the Korea Exchange (KRX) and the storage facilities being prepared by the Korea Securities Depository (KSD) to purchase a portion of the gold intended for export.

The central bank mentioned that it will arrange bulk trades after negotiating prices and quantities in advance to limit the impact on the domestic gold price. The new channel is expected to reduce forex risks as previous overseas purchases were all settled in USD. Additionally, the central bank revealed that it had purchased a small amount of gold ETFs in the second quarter. As of July, its gold holdings remained unchanged at 104.4 tons, while South Korea's forex reserves at the end of June stood at $427.36 billion, including $4.79 billion in gold reserves. (FX Street)