The BOK expects to complete a transaction and settlement system for domestic gold purchases on Dec. 14, clearing the way for purchases around the middle of the month, according to data submitted to Rep. Jung Tae-ho of the Democratic Party.
The initial purchase is expected to be around one metric ton, with the actual timing and volume depending on the availability of export-bound gold produced domestically.
The BOK declined to provide further details beyond information already disclosed.
The BOK told AJP that the new purchasing channel is intended to expand safe-asset holdings and diversify its foreign reserves over the medium to long term, while allowing it to acquire gold in Korean won without using foreign currency.
The timetable adds detail to a plan announced Aug. 3, when the central bank established a framework with domestic gold producers, the Korea Exchange (KRX) and the Korea Securities Depository (KSD) but left the timing of actual purchases undecided.
Under the plan, the BOK will buy gold that domestic producers had intended to export, using KRX and KSD trading, settlement and storage infrastructure.
Transactions will be conducted through negotiated block trades based on international gold prices, a structure designed to avoid generating additional demand in the domestic gold market.
The purchases will also give the BOK a new route to accumulate reserve gold using won rather than foreign currency.
Gold-related investment has already resumed this year through financial assets.
The BOK held 679,765 shares of the U.S.-listed SPDR Gold Trust at the end of June, valued at $250.41 million, after holding none of the exchange-traded fund at the end of the first quarter. InsiderSet
The ETF purchase marked the BOK's return to gold-related investment after more than a decade, while its physical gold holdings have remained unchanged at 104.4 metric tons since its last purchase in 2013.
At the end of August, gold was recorded at $4.79 billion in Korea's foreign reserves, accounting for 1.1 percent of the total under the central bank's accounting valuation. KDI EIE Center
The BOK has said rising geopolitical risks have increased the role of gold as a safe asset and that expanding its relatively low gold allocation could support reserve diversification.
AJP Takeaways
- The Bank of Korea plans to resume physical gold purchases in December after a 13-year pause, with an initial purchase of about one metric ton expected.
- The BOK plans to buy domestically produced, export-bound gold in won through infrastructure operated by KRX and KSD.
- The central bank had already resumed gold-related investment in the second quarter through a U.S.-listed gold ETF worth about $250 million at end-June.
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