While central banks around the world jump on gold to diversify their reserves, the Bank of Korea’s gold reserve has remained at a standstill for over a decade despite the bullion’s increasing appeal as a safe-haven asset amid heightened volatility in the global market.
Since 2013, Korea's gold reserves have remained unchanged at 104.4 metric tons for the past 12 years, with its share in total foreign currency reserves standing at 2.1 percent.
The BOK ranked 38th among global peers in terms of gold holdings in 2024, down from 32nd in 2013, according to the World Gold Council.
This is in contrast to other countries that have shown a clear trend of increasing their gold holdings.
In efforts to reduce reliance on the US dollar in global trade, BRICS countries -- Brazil, Russia, India, China, and South Africa – significantly expanded their gold reserves.
The combined holdings of the five nations rose to 5746.5 tons in 2024, up 12.3 percent from 5116.2 tons in 2020.
With US President Donald Trump’s tariff threats driving a strong appetite for safe assets, gold continued its record-breaking rally in recent weeks, surpassing the key $2,900 level for the first time.
The Bank of Korea, however, said it is in no hurry to join the gold-buying frenzy.
“It seems geopolitical issues drove some central banks to purchase more gold. Countries such as China and Russia, which could face sanctions and other difficulties in making transactions in US dollars are showing higher demand for gold to replace their dollar asset. But those are not concerns South Korea has because it is a strong trading partner to the US,” said a BOK official responsible for managing foreign reserves.
US gold holdings reached 8,134 tons in 2024, accounting for nearly a quarter of the world's gold reserves. The US is solidifying the dollar's status as a primary reserve currency through its enormous gold reserves, which takes up 75 percent of its foreign currency reserves.
The BOK’s lukewarm stance towards gold purchasing is because the bullion cannot be converted into cash as immediately as stocks and bonds.
“For example, US bonds and US stocks are almost seven times more liquid than gold. Assets that offer an easier way to convert into cash matter because central banks have to buy and sell en masse … it’s not one or two gold bars we’re talking about,” said a BOK official responsible for managing foreign reserves.
The high volatility of gold is another factor that makes the Korean Central Bank reluctant to add more to its portfolio based on its experience.
The BOK purchased 90 tons of gold between 2011 and 2013. As the international gold price, which was around $200 per ounce in the early 2000s, soared to nearly $1,900 in 2011, demand for gold purchases increased.
However, the price of gold plummeted to around $1,000 per ounce in 2015, and there has been a strong trend of caution over the high volatility of gold's price ever since.
Although gold has remained a less preferred asset to the BOK, retail investors and consumers are piling on the blistering gold rally here.
The price of a 100-gram gold bar reached 156,200 won on Monday, the highest since 2014. The figure has doubled in less than two years.
On Tuesday, the Korea Minting and Security Printing Corp temporarily halted sales of gold bars as it faces problems with sourcing supply and managing demand.
By Park Han-na (hnpark@heraldcorp.com)
