{"content_id":"zlfd9ggdkj","slug":"bank-of-korea-domestic-physical-gold-purchase-plan","locale":"en","schema_type":"Article","category":"report","category_name":"Report","title":"The Bank of Korea's First Physical Gold Purchase Plan in 13 Years and Domestic Procurement Method","summary":"The Bank of Korea is establishing a domestic procurement system to resume physical gold purchases, which it suspended after 2013. Purchasing in won, through over-the-counter transactions, gold from domestic refiners that was destined for export could reduce the direct impact on dollar liquidity and exchange-traded gold prices, but the actual purchase volume and timing may vary depending on market conditions.","author":{"name":"Injoys Editorial Team","url":"https://injoys.com/ko/about"},"key_points":["The Bank of Korea's gold holdings have remained at 104.4 metric tons since 2013.","The new procurement plan involves purchasing in won gold produced by domestic refiners that was intended for export.","Negotiated over-the-counter block trades reduce the extent to which the Bank of Korea's orders appear directly in exchange quotes available to ordinary investors.","Domestic storage could reduce the risk of concentration in overseas storage locations, but storage, verification, and liquidity management costs must also be considered.","Purchases of gold ETFs and physical gold differ in terms of price exposure, legal ownership, storage methods, and classification as foreign exchange reserves."],"content_markdown":"The Bank of Korea is moving to resume purchases of physical gold for the first time in 13 years since 2013. The key difference from the previous method of buying gold with dollars on the international gold market is the creation of a procurement channel through which the Bank can purchase in won gold produced by domestic refiners that was intended for export.\n\nHowever, “the first purchase in 13 years” should be understood as referring to a policy direction and the establishment of a procurement system. The specific contract size and timing of purchases may be determined based on gold prices, foreign exchange reserve management plans, market liquidity, and consultations with suppliers.\n\n## How Much Gold Does the Bank of Korea Hold?\n\nThe Bank of Korea purchased a total of 90 tons of additional gold from 2011 to 2013 and has since maintained its holdings at 104.4 tons. Since country rankings by gold holdings and gold’s share of foreign exchange reserves vary depending on the reference date, gold prices, and calculation method, a particular ranking or percentage should not be interpreted as a fixed figure.\n\nIn particular, the following two figures must be distinguished.\n\n- **Holdings by weight:** The physical weight of the gold held by the Bank of Korea. The figure of 104.4 tons falls into this category.\n- **Share by value:** The percentage of the total market value of foreign exchange reserves accounted for by gold. If international gold prices and exchange rates rise, this share may increase even without additional purchases.\n\nThe book value and market value of gold, as well as the calculation standards used by international comparison organizations, may also differ. Therefore, any answer to the question “What percentage does gold account for?” must specify both the calculation date and the valuation standard.\n\n## Why the Bank of Korea Wants to Increase Its Gold Holdings Again\n\n### Diversification of Foreign Exchange Reserve Assets\n\nForeign exchange reserves are managed with consideration for liquidity, safety, and profitability rather than being concentrated solely in a particular currency or bonds. Because gold does not directly depend on a particular country’s promise to pay, it can complement a portfolio centered on currencies and government bonds.\n\n### Responding to Geopolitical and Sanctions Risks\n\nIn the event of conflicts between countries, financial sanctions, or disruptions to payment networks, the transfer or disposal of assets held by overseas financial institutions may be restricted. Gold that a central bank directly owns and controls is one means of preparing for such extreme circumstances.\n\nHowever, accessibility and legal risks also vary depending on where and in what form gold is stored. Diversifying some gold held overseas into domestic infrastructure does not eliminate every risk, but it can reduce concentration in particular overseas storage facilities.\n\n### Rising Gold Demand from Central Banks Worldwide\n\nIn recent years, several central banks have been net purchasers of gold to diversify their foreign exchange reserves and manage geopolitical risks. However, purchases by other central banks do not automatically determine the appropriate level of holdings for the Bank of Korea. The Bank must consider the won exchange rate, foreign currency liquidity, the ability to sell assets, and gold price levels together.\n\n## A Structure for Buying Gold Domestically in Won\n\nThe proposed procurement plan involves the Bank of Korea, domestic nonferrous metal refiners, the Korea Exchange, and the Korea Securities Depository, among others. Refiners such as LS MnM and Korea Zinc recover gold as a byproduct while refining nonferrous metals such as copper and zinc.\n\nThe term “domestically produced gold” here does not necessarily mean gold mined in Korea. It may also include gold produced by refining imported ore or concentrate at domestic facilities, so it is more accurate to understand it as **gold refined and produced domestically**.\n\nAccording to the materials presented, domestic refiners produce approximately 40–45 tons of gold annually, of which approximately 4–5 tons that are not consumed domestically and are scheduled for export are the initial subject of discussions. This does not mean that the Bank of Korea will purchase the entire annual output.\n\n| Category | Existing International Procurement | Proposed Domestic Procurement |\n|---|---|---|\n| Main counterparty | Overseas gold markets or international financial institutions | Domestic refiners and others |\n| Settlement currency | Mainly U.S. dollars | Won |\n| Target volume | Gold traded on international markets | Volumes scheduled for export by domestic refiners |\n| Transaction method | International market trading | Pre-negotiated over-the-counter block trades |\n| Possible storage location | Mainly overseas storage infrastructure | Domestic storage and depository infrastructure may be used |\n| Main advantage | Large market and high liquidity | Reduced foreign exchange market burden and concentration risk in overseas storage |\n| Main constraint | Use of dollar liquidity | Constraints involving domestic supply, quality certification, and storage systems |\n\n## How Won-Denominated Purchases Reduce the Burden on the Foreign Exchange Market\n\nWhen the Bank of Korea purchases gold on international markets, it generally must pay in a foreign currency such as the dollar. If the purchase is large or the foreign exchange market is unstable, this may create a burden for foreign currency liquidity management.\n\nBy contrast, paying domestic producers in won allows the Bank to acquire gold assets without immediately disposing of existing dollar assets. In particular, acquiring domestically volumes that were scheduled for export reduces the need to separately obtain dollars for gold purchases in the on-exchange won-dollar market.\n\nHowever, won-denominated purchases do not eliminate the economic cost. Producers forgo the foreign currency they could have received by exporting the gold and instead receive won, while the Bank of Korea must pay a price reflecting international gold prices and exchange rates. From the perspective of the country as a whole, there is also an opportunity cost because the export revenue from the gold is not generated.\n\n## How Do Negotiated Over-the-Counter Block Trades Work?\n\nIf the Bank of Korea places a large purchase order in the same on-exchange order book used by ordinary investors, asking prices may rise rapidly and trigger follow-on buying. To reduce this effect, the Bank may negotiate the price, quantity, and settlement date with producers in advance and then conduct the transaction over the counter.\n\nThe general procedure can be described as follows.\n\n1. A domestic producer presents the volume scheduled for export and its preferred transaction timing.\n2. The Bank of Korea reviews its foreign exchange reserve management plan and domestic and international gold prices.\n3. The two sides negotiate the quantity, pricing formula, quality standards, and settlement terms.\n4. The transaction is completed after eligibility inspections and title transfer procedures.\n5. The gold is allocated to designated domestic storage and depository infrastructure.\n\nOver-the-counter transactions reduce the direct exposure of orders to on-exchange quotes, but they do not completely prevent domestic gold prices from rising. Once increased central bank demand becomes known, market expectations may change, and even volumes originally intended for export may affect the outlook for the future supply structure.\n\n## Why Volumes Scheduled for Export Are Purchased First\n\nIf the Bank of Korea absorbs large quantities of the domestically distributed gold used by ordinary investors or precious metal businesses, supply shortages and price distortions may occur. By contrast, acquiring volumes that were originally intended for export has a relatively limited direct effect on the existing supply in the domestic retail market.\n\nThis principle has three purposes.\n\n- Protect the volume circulating in the domestic spot gold market.\n- Limit the direct impact of the Bank of Korea’s purchase orders on on-exchange prices.\n- Provide domestic refiners with a stable counterparty for large-volume transactions.\n\nHowever, the criteria for determining whether gold is “scheduled for export,” the fairness of purchase prices, and the actual impact on domestic supply must be examined once the transaction system is specified in detail.\n\n## Advantages and Management Requirements of Domestic Storage\n\nA substantial portion of the physical gold held by the Bank of Korea is known to have been stored through overseas infrastructure. Increasing the share stored domestically can help prepare for risks such as operational shutdowns at overseas storage facilities, restrictions on asset transfers, or sanctions between countries.\n\nDomestic storage, however, requires the following conditions.\n\n- Verification of purity and specifications recognized in international markets\n- Recordkeeping for each gold bar, including serial numbers and weight\n- Independent physical inspections and regular audits\n- Security and insurance systems against theft, fire, and disasters\n- Transportation and recertification procedures required for future sales on international markets\n\nThe mere fact that gold is located domestically does not guarantee liquidity. To use it promptly as collateral during a crisis or sell it on international markets, the gold bars must meet international standards and have clear ownership records.\n\n## Physical Gold and Gold ETFs Are Not the Same Asset\n\nReports that the Bank of Korea purchased a small amount of gold ETFs must be distinguished from the procurement of physical gold. Both assets are affected by gold prices, but their legal and accounting characteristics differ.\n\n| Item | Physical Gold | Gold ETF |\n|---|---|---|\n| Asset held | Gold bars or direct rights to gold in an account | Fund shares or securities |\n| Counterparty risk | Exists depending on the custodian and settlement structure | Exists depending on the asset manager, trustee, and market structure |\n| Storage | Requires vaults and physical asset management | Investors do not directly store gold bars |\n| Ease of trading | May require transportation, inspection, and settlement | Can be traded relatively quickly in the market |\n| Costs | Storage, insurance, and inspection costs | Management fees and trading costs |\n| Foreign exchange reserve classification | May be classified as monetary gold if requirements are met | Generally not treated the same as physical monetary gold |\n\nUnder the International Monetary Fund’s balance of payments standards, “monetary gold” means gold owned by monetary authorities and held as a reserve asset. Shares in an ETF that tracks the price of gold provide price exposure but are not the same asset as physical monetary gold.\n\n## Key Indicators to Monitor Going Forward\n\nTo assess the Bank of Korea’s policy of expanding its gold holdings, actual operating data rather than announcement headlines must be examined.\n\n- Annual physical gold purchases and cumulative holdings\n- Average purchase price and price-setting criteria\n- Changes in the amounts stored domestically and overseas\n- Gold’s share of the total market value of foreign exchange reserves\n- Differences between on-exchange and off-exchange gold prices and changes in domestic circulation volumes\n- Quality certification, storage fees, and insurance costs\n- Conditions for suspending or postponing purchases\n\nThe significance of this plan does not lie simply in buying more gold. The key is that it creates a new foreign exchange reserve management channel through which the Bank can acquire domestically produced gold in won without immediately disposing of dollar assets while diversifying storage locations and asset types. However, because over-the-counter purchases do not completely eliminate price and supply effects, transparent ex post disclosure of transaction volumes and pricing formulas is important.","content_html":"\u003cp\u003eThe Bank of Korea is moving to resume purchases of physical gold for the first time in 13 years since 2013. The key difference from the previous method of buying gold with dollars on the international gold market is the creation of a procurement channel through which the Bank can purchase in won gold produced by domestic refiners that was intended for export.\u003c/p\u003e\n\u003cp\u003eHowever, “the first purchase in 13 years” should be understood as referring to a policy direction and the establishment of a procurement system. The specific contract size and timing of purchases may be determined based on gold prices, foreign exchange reserve management plans, market liquidity, and consultations with suppliers.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#how-much-gold-does-the-bank-of-korea-hold\" class=\"anchor\" id=\"how-much-gold-does-the-bank-of-korea-hold\"\u003e\u003c/a\u003eHow Much Gold Does the Bank of Korea Hold?\u003c/h2\u003e\n\u003cp\u003eThe Bank of Korea purchased a total of 90 tons of additional gold from 2011 to 2013 and has since maintained its holdings at 104.4 tons. Since country rankings by gold holdings and gold’s share of foreign exchange reserves vary depending on the reference date, gold prices, and calculation method, a particular ranking or percentage should not be interpreted as a fixed figure.\u003c/p\u003e\n\u003cp\u003eIn particular, the following two figures must be distinguished.\u003c/p\u003e\n\u003cul\u003e\n\u003cli\u003e\n\u003cstrong\u003eHoldings by weight:\u003c/strong\u003e The physical weight of the gold held by the Bank of Korea. The figure of 104.4 tons falls into this category.\u003c/li\u003e\n\u003cli\u003e\n\u003cstrong\u003eShare by value:\u003c/strong\u003e The percentage of the total market value of foreign exchange reserves accounted for by gold. If international gold prices and exchange rates rise, this share may increase even without additional purchases.\u003c/li\u003e\n\u003c/ul\u003e\n\u003cp\u003eThe book value and market value of gold, as well as the calculation standards used by international comparison organizations, may also differ. Therefore, any answer to the question “What percentage does gold account for?” must specify both the calculation date and the valuation standard.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#why-the-bank-of-korea-wants-to-increase-its-gold-holdings-again\" class=\"anchor\" id=\"why-the-bank-of-korea-wants-to-increase-its-gold-holdings-again\"\u003e\u003c/a\u003eWhy the Bank of Korea Wants to Increase Its Gold Holdings Again\u003c/h2\u003e\n\u003ch3\u003e\n\u003ca href=\"#diversification-of-foreign-exchange-reserve-assets\" class=\"anchor\" id=\"diversification-of-foreign-exchange-reserve-assets\"\u003e\u003c/a\u003eDiversification of Foreign Exchange Reserve Assets\u003c/h3\u003e\n\u003cp\u003eForeign exchange reserves are managed with consideration for liquidity, safety, and profitability rather than being concentrated solely in a particular currency or bonds. Because gold does not directly depend on a particular country’s promise to pay, it can complement a portfolio centered on currencies and government bonds.\u003c/p\u003e\n\u003ch3\u003e\n\u003ca href=\"#responding-to-geopolitical-and-sanctions-risks\" class=\"anchor\" id=\"responding-to-geopolitical-and-sanctions-risks\"\u003e\u003c/a\u003eResponding to Geopolitical and Sanctions Risks\u003c/h3\u003e\n\u003cp\u003eIn the event of conflicts between countries, financial sanctions, or disruptions to payment networks, the transfer or disposal of assets held by overseas financial institutions may be restricted. Gold that a central bank directly owns and controls is one means of preparing for such extreme circumstances.\u003c/p\u003e\n\u003cp\u003eHowever, accessibility and legal risks also vary depending on where and in what form gold is stored. Diversifying some gold held overseas into domestic infrastructure does not eliminate every risk, but it can reduce concentration in particular overseas storage facilities.\u003c/p\u003e\n\u003ch3\u003e\n\u003ca href=\"#rising-gold-demand-from-central-banks-worldwide\" class=\"anchor\" id=\"rising-gold-demand-from-central-banks-worldwide\"\u003e\u003c/a\u003eRising Gold Demand from Central Banks Worldwide\u003c/h3\u003e\n\u003cp\u003eIn recent years, several central banks have been net purchasers of gold to diversify their foreign exchange reserves and manage geopolitical risks. However, purchases by other central banks do not automatically determine the appropriate level of holdings for the Bank of Korea. The Bank must consider the won exchange rate, foreign currency liquidity, the ability to sell assets, and gold price levels together.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#a-structure-for-buying-gold-domestically-in-won\" class=\"anchor\" id=\"a-structure-for-buying-gold-domestically-in-won\"\u003e\u003c/a\u003eA Structure for Buying Gold Domestically in Won\u003c/h2\u003e\n\u003cp\u003eThe proposed procurement plan involves the Bank of Korea, domestic nonferrous metal refiners, the Korea Exchange, and the Korea Securities Depository, among others. Refiners such as LS MnM and Korea Zinc recover gold as a byproduct while refining nonferrous metals such as copper and zinc.\u003c/p\u003e\n\u003cp\u003eThe term “domestically produced gold” here does not necessarily mean gold mined in Korea. It may also include gold produced by refining imported ore or concentrate at domestic facilities, so it is more accurate to understand it as \u003cstrong\u003egold refined and produced domestically\u003c/strong\u003e.\u003c/p\u003e\n\u003cp\u003eAccording to the materials presented, domestic refiners produce approximately 40–45 tons of gold annually, of which approximately 4–5 tons that are not consumed domestically and are scheduled for export are the initial subject of discussions. This does not mean that the Bank of Korea will purchase the entire annual output.\u003c/p\u003e\n\u003cdiv class=\"overflow-x-auto\"\u003e\u003ctable\u003e\n\u003cthead\u003e\n\u003ctr\u003e\n\u003cth\u003eCategory\u003c/th\u003e\n\u003cth\u003eExisting International Procurement\u003c/th\u003e\n\u003cth\u003eProposed Domestic Procurement\u003c/th\u003e\n\u003c/tr\u003e\n\u003c/thead\u003e\n\u003ctbody\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eMain counterparty\u003c/td\u003e\n\u003ctd data-label=\"Existing International Procurement\"\u003eOverseas gold markets or international financial institutions\u003c/td\u003e\n\u003ctd data-label=\"Proposed Domestic Procurement\"\u003eDomestic refiners and others\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eSettlement currency\u003c/td\u003e\n\u003ctd data-label=\"Existing International Procurement\"\u003eMainly U.S. dollars\u003c/td\u003e\n\u003ctd data-label=\"Proposed Domestic Procurement\"\u003eWon\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eTarget volume\u003c/td\u003e\n\u003ctd data-label=\"Existing International Procurement\"\u003eGold traded on international markets\u003c/td\u003e\n\u003ctd data-label=\"Proposed Domestic Procurement\"\u003eVolumes scheduled for export by domestic refiners\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eTransaction method\u003c/td\u003e\n\u003ctd data-label=\"Existing International Procurement\"\u003eInternational market trading\u003c/td\u003e\n\u003ctd data-label=\"Proposed Domestic Procurement\"\u003ePre-negotiated over-the-counter block trades\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003ePossible storage location\u003c/td\u003e\n\u003ctd data-label=\"Existing International Procurement\"\u003eMainly overseas storage infrastructure\u003c/td\u003e\n\u003ctd data-label=\"Proposed Domestic Procurement\"\u003eDomestic storage and depository infrastructure may be used\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eMain advantage\u003c/td\u003e\n\u003ctd data-label=\"Existing International Procurement\"\u003eLarge market and high liquidity\u003c/td\u003e\n\u003ctd data-label=\"Proposed Domestic Procurement\"\u003eReduced foreign exchange market burden and concentration risk in overseas storage\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Category\"\u003eMain constraint\u003c/td\u003e\n\u003ctd data-label=\"Existing International Procurement\"\u003eUse of dollar liquidity\u003c/td\u003e\n\u003ctd data-label=\"Proposed Domestic Procurement\"\u003eConstraints involving domestic supply, quality certification, and storage systems\u003c/td\u003e\n\u003c/tr\u003e\n\u003c/tbody\u003e\n\u003c/table\u003e\u003c/div\u003e\n\u003ch2\u003e\n\u003ca href=\"#how-won-denominated-purchases-reduce-the-burden-on-the-foreign-exchange-market\" class=\"anchor\" id=\"how-won-denominated-purchases-reduce-the-burden-on-the-foreign-exchange-market\"\u003e\u003c/a\u003eHow Won-Denominated Purchases Reduce the Burden on the Foreign Exchange Market\u003c/h2\u003e\n\u003cp\u003eWhen the Bank of Korea purchases gold on international markets, it generally must pay in a foreign currency such as the dollar. If the purchase is large or the foreign exchange market is unstable, this may create a burden for foreign currency liquidity management.\u003c/p\u003e\n\u003cp\u003eBy contrast, paying domestic producers in won allows the Bank to acquire gold assets without immediately disposing of existing dollar assets. In particular, acquiring domestically volumes that were scheduled for export reduces the need to separately obtain dollars for gold purchases in the on-exchange won-dollar market.\u003c/p\u003e\n\u003cp\u003eHowever, won-denominated purchases do not eliminate the economic cost. Producers forgo the foreign currency they could have received by exporting the gold and instead receive won, while the Bank of Korea must pay a price reflecting international gold prices and exchange rates. From the perspective of the country as a whole, there is also an opportunity cost because the export revenue from the gold is not generated.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#how-do-negotiated-over-the-counter-block-trades-work\" class=\"anchor\" id=\"how-do-negotiated-over-the-counter-block-trades-work\"\u003e\u003c/a\u003eHow Do Negotiated Over-the-Counter Block Trades Work?\u003c/h2\u003e\n\u003cp\u003eIf the Bank of Korea places a large purchase order in the same on-exchange order book used by ordinary investors, asking prices may rise rapidly and trigger follow-on buying. To reduce this effect, the Bank may negotiate the price, quantity, and settlement date with producers in advance and then conduct the transaction over the counter.\u003c/p\u003e\n\u003cp\u003eThe general procedure can be described as follows.\u003c/p\u003e\n\u003col\u003e\n\u003cli\u003eA domestic producer presents the volume scheduled for export and its preferred transaction timing.\u003c/li\u003e\n\u003cli\u003eThe Bank of Korea reviews its foreign exchange reserve management plan and domestic and international gold prices.\u003c/li\u003e\n\u003cli\u003eThe two sides negotiate the quantity, pricing formula, quality standards, and settlement terms.\u003c/li\u003e\n\u003cli\u003eThe transaction is completed after eligibility inspections and title transfer procedures.\u003c/li\u003e\n\u003cli\u003eThe gold is allocated to designated domestic storage and depository infrastructure.\u003c/li\u003e\n\u003c/ol\u003e\n\u003cp\u003eOver-the-counter transactions reduce the direct exposure of orders to on-exchange quotes, but they do not completely prevent domestic gold prices from rising. Once increased central bank demand becomes known, market expectations may change, and even volumes originally intended for export may affect the outlook for the future supply structure.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#why-volumes-scheduled-for-export-are-purchased-first\" class=\"anchor\" id=\"why-volumes-scheduled-for-export-are-purchased-first\"\u003e\u003c/a\u003eWhy Volumes Scheduled for Export Are Purchased First\u003c/h2\u003e\n\u003cp\u003eIf the Bank of Korea absorbs large quantities of the domestically distributed gold used by ordinary investors or precious metal businesses, supply shortages and price distortions may occur. By contrast, acquiring volumes that were originally intended for export has a relatively limited direct effect on the existing supply in the domestic retail market.\u003c/p\u003e\n\u003cp\u003eThis principle has three purposes.\u003c/p\u003e\n\u003cul\u003e\n\u003cli\u003eProtect the volume circulating in the domestic spot gold market.\u003c/li\u003e\n\u003cli\u003eLimit the direct impact of the Bank of Korea’s purchase orders on on-exchange prices.\u003c/li\u003e\n\u003cli\u003eProvide domestic refiners with a stable counterparty for large-volume transactions.\u003c/li\u003e\n\u003c/ul\u003e\n\u003cp\u003eHowever, the criteria for determining whether gold is “scheduled for export,” the fairness of purchase prices, and the actual impact on domestic supply must be examined once the transaction system is specified in detail.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#advantages-and-management-requirements-of-domestic-storage\" class=\"anchor\" id=\"advantages-and-management-requirements-of-domestic-storage\"\u003e\u003c/a\u003eAdvantages and Management Requirements of Domestic Storage\u003c/h2\u003e\n\u003cp\u003eA substantial portion of the physical gold held by the Bank of Korea is known to have been stored through overseas infrastructure. Increasing the share stored domestically can help prepare for risks such as operational shutdowns at overseas storage facilities, restrictions on asset transfers, or sanctions between countries.\u003c/p\u003e\n\u003cp\u003eDomestic storage, however, requires the following conditions.\u003c/p\u003e\n\u003cul\u003e\n\u003cli\u003eVerification of purity and specifications recognized in international markets\u003c/li\u003e\n\u003cli\u003eRecordkeeping for each gold bar, including serial numbers and weight\u003c/li\u003e\n\u003cli\u003eIndependent physical inspections and regular audits\u003c/li\u003e\n\u003cli\u003eSecurity and insurance systems against theft, fire, and disasters\u003c/li\u003e\n\u003cli\u003eTransportation and recertification procedures required for future sales on international markets\u003c/li\u003e\n\u003c/ul\u003e\n\u003cp\u003eThe mere fact that gold is located domestically does not guarantee liquidity. To use it promptly as collateral during a crisis or sell it on international markets, the gold bars must meet international standards and have clear ownership records.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#physical-gold-and-gold-etfs-are-not-the-same-asset\" class=\"anchor\" id=\"physical-gold-and-gold-etfs-are-not-the-same-asset\"\u003e\u003c/a\u003ePhysical Gold and Gold ETFs Are Not the Same Asset\u003c/h2\u003e\n\u003cp\u003eReports that the Bank of Korea purchased a small amount of gold ETFs must be distinguished from the procurement of physical gold. Both assets are affected by gold prices, but their legal and accounting characteristics differ.\u003c/p\u003e\n\u003cdiv class=\"overflow-x-auto\"\u003e\u003ctable\u003e\n\u003cthead\u003e\n\u003ctr\u003e\n\u003cth\u003eItem\u003c/th\u003e\n\u003cth\u003ePhysical Gold\u003c/th\u003e\n\u003cth\u003eGold ETF\u003c/th\u003e\n\u003c/tr\u003e\n\u003c/thead\u003e\n\u003ctbody\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eAsset held\u003c/td\u003e\n\u003ctd data-label=\"Physical Gold\"\u003eGold bars or direct rights to gold in an account\u003c/td\u003e\n\u003ctd data-label=\"Gold ETF\"\u003eFund shares or securities\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eCounterparty risk\u003c/td\u003e\n\u003ctd data-label=\"Physical Gold\"\u003eExists depending on the custodian and settlement structure\u003c/td\u003e\n\u003ctd data-label=\"Gold ETF\"\u003eExists depending on the asset manager, trustee, and market structure\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eStorage\u003c/td\u003e\n\u003ctd data-label=\"Physical Gold\"\u003eRequires vaults and physical asset management\u003c/td\u003e\n\u003ctd data-label=\"Gold ETF\"\u003eInvestors do not directly store gold bars\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eEase of trading\u003c/td\u003e\n\u003ctd data-label=\"Physical Gold\"\u003eMay require transportation, inspection, and settlement\u003c/td\u003e\n\u003ctd data-label=\"Gold ETF\"\u003eCan be traded relatively quickly in the market\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eCosts\u003c/td\u003e\n\u003ctd data-label=\"Physical Gold\"\u003eStorage, insurance, and inspection costs\u003c/td\u003e\n\u003ctd data-label=\"Gold ETF\"\u003eManagement fees and trading costs\u003c/td\u003e\n\u003c/tr\u003e\n\u003ctr\u003e\n\u003ctd data-label=\"Item\"\u003eForeign exchange reserve classification\u003c/td\u003e\n\u003ctd data-label=\"Physical Gold\"\u003eMay be classified as monetary gold if requirements are met\u003c/td\u003e\n\u003ctd data-label=\"Gold ETF\"\u003eGenerally not treated the same as physical monetary gold\u003c/td\u003e\n\u003c/tr\u003e\n\u003c/tbody\u003e\n\u003c/table\u003e\u003c/div\u003e\n\u003cp\u003eUnder the International Monetary Fund’s balance of payments standards, “monetary gold” means gold owned by monetary authorities and held as a reserve asset. Shares in an ETF that tracks the price of gold provide price exposure but are not the same asset as physical monetary gold.\u003c/p\u003e\n\u003ch2\u003e\n\u003ca href=\"#key-indicators-to-monitor-going-forward\" class=\"anchor\" id=\"key-indicators-to-monitor-going-forward\"\u003e\u003c/a\u003eKey Indicators to Monitor Going Forward\u003c/h2\u003e\n\u003cp\u003eTo assess the Bank of Korea’s policy of expanding its gold holdings, actual operating data rather than announcement headlines must be examined.\u003c/p\u003e\n\u003cul\u003e\n\u003cli\u003eAnnual physical gold purchases and cumulative holdings\u003c/li\u003e\n\u003cli\u003eAverage purchase price and price-setting criteria\u003c/li\u003e\n\u003cli\u003eChanges in the amounts stored domestically and overseas\u003c/li\u003e\n\u003cli\u003eGold’s share of the total market value of foreign exchange reserves\u003c/li\u003e\n\u003cli\u003eDifferences between on-exchange and off-exchange gold prices and changes in domestic circulation volumes\u003c/li\u003e\n\u003cli\u003eQuality certification, storage fees, and insurance costs\u003c/li\u003e\n\u003cli\u003eConditions for suspending or postponing purchases\u003c/li\u003e\n\u003c/ul\u003e\n\u003cp\u003eThe significance of this plan does not lie simply in buying more gold. The key is that it creates a new foreign exchange reserve management channel through which the Bank can acquire domestically produced gold in won without immediately disposing of dollar assets while diversifying storage locations and asset types. However, because over-the-counter purchases do not completely eliminate price and supply effects, transparent ex post disclosure of transaction volumes and pricing formulas is important.\u003c/p\u003e\n","tags":["Bank of Korea","Gold holdings","Foreign exchange reserves","Central bank","Safe haven assets"],"faqs":[{"question":"How much gold does the Bank of Korea currently hold?","answer":"The Bank of Korea is known to hold 104.4 tonnes of physical gold. Of this, 90 tonnes were purchased additionally between 2011 and 2013, and its holdings remained unchanged for a long period thereafter."},{"question":"Does the first gold purchase in 13 years mean that a contract has already been finalized?","answer":"Not necessarily. The establishment of a procurement framework and the presentation of a medium- to long-term purchasing strategy should be distinguished from the execution of individual transactions. The actual volume and timing may vary depending on gold prices, the foreign exchange reserve management plan, and the outcome of consultations with companies."},{"question":"Why does the Bank of Korea want to buy gold with won rather than dollars?","answer":"Paying domestic producers in won reduces the need to separately procure dollars for gold purchases on the international market or immediately sell existing dollar-denominated assets. This could help ease foreign currency liquidity pressures when the foreign exchange market is unstable."},{"question":"Is all the gold produced by domestic refiners mined in Korea?","answer":"No. Domestic refiners can also recover gold as a by-product while refining imported ore or concentrates. Therefore, “gold refined and produced in Korea” is a more accurate description than “Korean gold.”"},{"question":"How much domestically produced gold can the Bank of Korea purchase annually?","answer":"The materials provided explain that domestic refiners produce approximately 40–45 tonnes annually and identify approximately 4–5 tonnes of that amount, which is not consumed domestically and is scheduled for export, as the initial subject of consultations. The actual purchase volume may be lower and may vary from year to year."},{"question":"What is an off-exchange negotiated block trade?","answer":"It is a method of executing large transactions in which the buyer and seller agree in advance on terms such as price, quantity, and settlement date, separately from regular on-exchange orders. This can reduce the direct visibility of the Bank of Korea’s orders in public bid and ask quotes."},{"question":"Wouldn’t off-exchange transactions drive up domestic gold prices?","answer":"They can reduce the direct impact on on-exchange quotes, but they cannot eliminate the price impact entirely. If new demand from the central bank changes market expectations or affects the outlook for future supply, off-exchange transactions can also have an indirect price effect."},{"question":"Is buying a gold ETF the same as buying physical gold?","answer":"No. A gold ETF is a security or fund interest that tracks the price of gold, while physical gold represents a direct right to gold bars or a gold account. They differ in terms of custody arrangements, counterparty risk, costs, and classification as foreign exchange reserves."},{"question":"Does storing gold domestically eliminate the risk of overseas asset freezes?","answer":"It reduces concentration risk involving overseas custodians, but it does not eliminate all risks. The security of domestic storage facilities, quality verification, disaster response, insurance, the ability to sell on international markets, and ownership records must also be managed."},{"question":"Why does the share of gold holdings vary across different sources?","answer":"This is because gold prices, exchange rates, the total amount of foreign exchange reserves, reference dates, and valuation methods differ. Even if holdings by weight remain unchanged, a rise in gold prices can increase their share based on market value."}],"sources":[{"url":"https://www.bok.or.kr/portal/main/main.do","title":"Bank of Korea","type":"source"},{"url":"https://www.gold.org/goldhub/data/gold-reserves-by-country","title":"World Gold Council: Gold Reserves by Country","type":"data_point"},{"url":"https://www.imf.org/external/pubs/ft/bop/2007/bopman6.htm","title":"IMF Balance of Payments and International Investment Position Manual, Sixth Edition","type":"source"},{"url":"https://www.krx.co.kr/main/main.jsp","title":"Korea Exchange","type":"source"},{"url":"https://www.ksd.or.kr/ko/","title":"Korea Securities Depository","type":"source"}],"images":[{"id":593,"url":"https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6NzA1NywicHVyIjoiYmxvYl9pZCJ9fQ==--9bb10ccca5af730bcdff2746e169ce0cb1a4f0ef/ai-2637fdd8.webp","is_representative":true,"generation_method":"ai_image","license":"ai_generated","mime_type":"image/webp","translations":{"ko":{"alt":"제련소에서 금고로 이어지는 컨베이어 위의 금괴와 동전, 바다 위 화물선","caption":"국내에서 조달한 실물 금이 제련소를 거쳐 금고에 보관되는 과정을 상징적으로 표현했다.","description":null},"en":{"alt":"Gold bars and coins moving from a refinery to a vault, with a cargo ship offshore","caption":"The illustration symbolizes domestically sourced physical gold moving from refining into secure storage.","description":null},"ja":{"alt":"製錬所から金庫へ運ばれる金塊と金貨、沖合の貨物船","caption":"国内調達された現物金が製錬所を経て金庫に保管される流れを象徴している。","description":null},"es":{"alt":"Lingotes y monedas de oro entre una refinería y una bóveda, con un carguero al fondo","caption":"La ilustración simboliza el traslado del oro físico adquirido en el país desde su refinado hasta una bóveda segura.","description":null},"id":{"alt":"Batangan dan koin emas bergerak dari kilang ke brankas, dengan kapal kargo di laut","caption":"Ilustrasi ini melambangkan alur emas fisik yang diperoleh di dalam negeri dari pemurnian hingga penyimpanan aman.","description":null},"pt":{"alt":"Barras e moedas de ouro entre uma refinaria e um cofre, com um navio cargueiro ao fundo","caption":"A ilustração simboliza o percurso do ouro físico adquirido no país, do refino ao armazenamento seguro.","description":null},"zh-hant":{"alt":"金條與金幣從精煉廠運往金庫，海面上有一艘貨輪","caption":"插畫象徵在國內採購的實體黃金經精煉後運入金庫保存。","description":null},"de":{"alt":"Goldbarren und Münzen auf dem Weg von einer Raffinerie zum Tresor, Frachtschiff im Hintergrund","caption":"Die Illustration zeigt symbolisch den Weg von im Inland beschafftem physischem Gold von der Raffination in den Tresor.","description":null}}},{"id":594,"url":"https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6NzA2MywicHVyIjoiYmxvYl9pZCJ9fQ==--aa27dfbbea6fc16dc57de5f1cc505632ad7f7798/ai-39c1bf5f.webp","is_representative":false,"generation_method":"ai_image","license":"ai_generated","mime_type":"image/webp","translations":{"ko":{"alt":"금괴가 든 대형 금고와 조달 경로 지도, 보안 아이콘, 금 시세 문서가 배치된 일러스트","caption":"금괴의 조달과 안전한 보관 과정을 금고와 경로 지도로 표현했다.","description":null},"en":{"alt":"Illustration of gold-filled vaults, a procurement route map, security icons, and a gold price chart","caption":"Vaults and a route map represent the procurement and secure storage of physical gold.","description":null},"ja":{"alt":"金塊入りの大型金庫、調達経路の地図、セキュリティーアイコン、金価格資料のイラスト","caption":"現物金の調達と安全な保管の流れを金庫と経路図で表している。","description":null},"es":{"alt":"Ilustración de bóvedas con lingotes, mapa de rutas, iconos de seguridad y gráfico del precio del oro","caption":"Las bóvedas y el mapa representan la adquisición y custodia segura de oro físico.","description":null},"id":{"alt":"Ilustrasi brankas berisi emas, peta jalur pengadaan, ikon keamanan, dan grafik harga emas","caption":"Brankas dan peta jalur menggambarkan pengadaan serta penyimpanan aman emas fisik.","description":null},"pt":{"alt":"Ilustração de cofres com barras de ouro, mapa de rotas, ícones de segurança e gráfico do preço do ouro","caption":"Os cofres e o mapa representam a aquisição e a guarda segura de ouro físico.","description":null},"zh-hant":{"alt":"裝有金條的大型金庫、採購路線地圖、安全圖示與金價圖表插畫","caption":"金庫與路線地圖呈現實體黃金的採購及安全保管流程。","description":null},"de":{"alt":"Illustration mit goldgefüllten Tresoren, Beschaffungsroute, Sicherheitssymbolen und Goldpreisdiagramm","caption":"Tresore und Routenkarte stehen für die Beschaffung und sichere Verwahrung physischen Goldes.","description":null}}}],"published_at":"2026-08-12T00:31:49+09:00","updated_at":"2026-08-12T00:31:49+09:00","license":"cc_by","translation_status":"reviewed","available_locales":["ko","en","ja","es"],"data_locales":["ko","en","ja","es","id","pt","zh-hant","de"],"url":"https://injoys.com/en/articles/bank-of-korea-domestic-physical-gold-purchase-plan"}