Seoul is buying gold again, 13 years after swearing it off

The Bank of Korea (@bok_hub) is returning to the gold market for the first time in 13 years, ending a pause that began after the central bank drew sharp criticism for its timing. The bank bought a total of 90 tonnes between 2011 and 2013, lifting its holdings to 104.4 tonnes. Those purchases, made near the peak of a multi-year gold rally, later became a source of embarrassment. According to Korea Economic Daily figures cited in the original report, those same bars are now worth around $11.8 billion against the $4.7 billion paid.

A Cautious Return, Built Around Domestic Supply

South Korea's first pathway for purchasing physical gold in 13 years has been designed around a constraint rather than a target. The Bank of Korea will consider buying only domestically produced bullion that would otherwise be exported, limiting the available supply to an estimated 4 to 5 metric tonnes annually. That restriction shields Korea's retail gold market from additional central-bank demand, but it also ensures the program cannot quickly reshape the composition of the country's foreign exchange reserves.

The central bank announced on August 3 that it had established a purchasing framework with domestic producer LS MnM, the Korea Exchange, and the Korea Securities Depository. To prevent price volatility in the domestic exchange market, the central bank will use negotiated block trades in the Korea Exchange's gold market. A Bank of Korea spokesperson noted that the plan is in its very early stages and that no decisions had been made regarding the timing or size of potential purchases.

The move goes beyond physical bullion. After recently starting to invest in overseas-listed spot gold ETFs, the central bank has also established a framework to purchase domestically produced gold in the near future. The BOK's Reserve Management Group increased its gold exposure in the second quarter by purchasing overseas-listed spot gold ETFs. The BOK has traditionally purchased gold only in physical form and stored it at the Bank of England.

Seoul Joins a Record-Breaking Global Wave

The timing puts South Korea firmly inside a broad shift in central bank reserve strategy. Central bank net gold demand picked up significantly in Q2, reaching 289 tonnes, a fivefold increase on Q1's revised estimate of 57 tonnes and a record high for a second quarter. Poland's central bank was the biggest buyer, adding 51 tonnes, followed by China's, which purchased 33 tonnes, its largest quarterly addition since late 2023.

Renewed interest in gold reflects rising geopolitical risks and the broader accumulation of bullion by central banks seeking to diversify reserves. The World Gold Council's Central Bank Gold Reserves Survey found 89% of central bankers expect to increase gold reserves over the next 12 months, with many citing reserve diversification and protection against geopolitical risk as motivations. For Seoul, the return is a modest one. At 4 to 5 tonnes a year, it will take years before Korea's 104.4-tonne holding changes materially. But the direction of travel is now clear.

Sources:
Korea Economic Daily: Bank of Korea makes first gold purchases in 13 years
World Gold Council: Gold Demand Trends Q2 2026, Central Banks
Korea JoongAng Daily: Bank of Korea resumes gold buying after 13-year pause