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🇰🇷 South Korea /Economy & Trade

Bank of Korea prepares to buy gold as central banks ramp up purchases

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Central banks globally are increasing their gold reserves, a trend that became more pronounced after the Russia-Ukraine war began in February 2022.
  • South Korea's central bank is preparing to purchase gold for the first time in 13 years, reflecting this growing international trend.
  • Factors driving this shift include geopolitical risks, a desire to diversify foreign exchange reserves away from the US dollar, and a need to bolster confidence in weaker national currencies.

Central banks worldwide are actively expanding their gold holdings, a noticeable shift that has gained momentum since the outbreak of the Russia-Ukraine war in February 2022. This global trend is mirrored by South Korea's central bank, which is preparing to make its first gold purchase in 13 years, signaling a broader international movement towards increasing gold reserves.

Global central bank net gold purchases reached 863.3 tons last year, a figure that, while lower than the average exceeding 1,000 tons in 2022-2024, is still considered a significant increase compared to the 255.0 tons in 2020 and 450.1 tons in 2021. A survey by the World Gold Council indicates this trend is expected to continue, with 78% of central banks anticipating a slight increase and 5% expecting a significant rise in gold's share of their foreign reserves over the next five years.

Geopolitical instability is a primary driver, with countries facing tensions with the United States leading the charge in increasing gold reserves. This diversification strategy aims to reduce reliance on the US dollar and spread risk across assets. Additionally, nations with less stable domestic currencies are also boosting their gold holdings to enhance financial credibility.

While some (central) banks are reducing their gold holdings, the overall atmosphere is one of increasing them. As geopolitical risks grow, it has spread from countries in conflict with the US to nations like Singapore.

— Jo Seok-bang, Head of Foreign Exchange Planning at the Bank of KoreaExplaining the trend of central banks increasing gold reserves.

Notable increases in gold reserves have been observed in countries like China, whose holdings rose from 1,948.3 tons to 2,331.5 tons between 2020 and early 2024, improving its global ranking. Poland's gold reserves have nearly tripled, jumping from 228.7 tons to 613.9 tons in the same period, underscoring the impact of international instability. Turkey has also increased its gold reserves, reflecting concerns about its currency's reliability.

South Korea, which last purchased gold in 2013, holds its 104.4 tons of reserves with the Bank of England. The Bank of Korea recently announced new channels for domestic gold acquisition, indicating its intention to increase its holdings. Currently, gold constitutes just over 1.1% of South Korea's foreign reserves, and its global ranking has slipped.

In addition to geopolitical risks, gold holdings are being increased to diversify foreign exchange assets concentrated in the US dollar, and in cases where the credibility of the national currency is weak.

— Jo Seok-bang, Head of Foreign Exchange Planning at the Bank of KoreaFurther elaborating on the motivations behind central banks' gold purchases.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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