South Korea's Central Bank Purchases Domestic Gold for the First Time in 13 Years

The Bank of Korea announced that it will collaborate with LS MnM, the Korea Exchange (KRX), and the Korea Securities Depository (KSD) to purchase domestically produced gold through over-the-counter transactions for the first time in 13 years. This move is prompted by the increasing geopolitical risks that necessitate diversifying foreign exchange reserves. LS MnM and Korea Zinc produce approximately 40 to 45 tons of gold annually from smelting by-products, with about 10% allocated for export. The central bank stated that it will consider utilizing the trading and settlement systems of KRX and the storage facilities prepared by KSD to purchase some of the gold intended for export. The central bank plans to arrange bulk transactions after prior consultations on price and quantity to limit the impact on domestic gold prices and reduce foreign exchange risks, as previous overseas purchases were made in USD. Additionally, the central bank has acquired 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 foreign exchange reserves at the end of June stood at $427.36 billion, including $4.79 billion in gold reserves.