Against the backdrop of global central banks boosting gold allocations and rising concerns over geopolitical and sovereign debt risks, the Bank of Korea is set to re-enter the physical gold market. According to the latest South Korean media reports, the Bank of Korea plans to purchase approximately 1 ton of domestically produced gold this December, worth around 200 billion South Korean won (roughly $140 million). If the transaction is completed as scheduled, it will mark the first increase in the central bank’s physical gold reserves since 2013.
More notably, this move is not merely a one-off spot transaction. The Korea Exchange (KRX) is building a dedicated gold trading, custody and settlement mechanism for the central bank, with relevant rules expected to take effect officially on December 14. The Bank of Korea will then be able to purchase gold originally intended for export from domestic gold producers via negotiated block trades, avoiding direct purchases using foreign exchange assets such as US dollars.
Physical Gold Purchase Resumed After 13 Years
Citing materials obtained from the office of Jeong Tae-ho, a member of the National Assembly’s Planning and Finance Committee, the Seoul Economic Daily reported that the foreign reserve management division of the Bank of Korea plans to buy domestically produced physical gold by the end of this year, with an initial batch of roughly 1 ton. The Bank of Korea stated that the relevant trading system is expected to be ready around December 14, so the first transaction could take place as early as that day.
The last time the Bank of Korea raised its physical gold reserves dates back to February 2013. Between 2011 and 2013, the central bank accumulated about 90 tons of gold overseas, but has not added more physical holdings ever since, keeping its gold reserves at 104.4 tons.
As of the end of August, the Bank of Korea held 104.4 tons of gold with a book value of approximately $4.79 billion, accounting for about 1.1% of its foreign exchange reserves. Calculated at market prices, the proportion stands at roughly 3.4%. The Seoul Economic Daily cited data from the World Gold Council, noting South Korea’s gold reserve volume currently ranks 39th globally.
Therefore, even with the planned purchase of about 1 ton of gold, the increase is less than 1% relative to the existing 104.4 tons of reserves. What really draws market attention is not the purchase size itself, but the fact that the Bank of Korea has re-established a mechanism for buying physical gold after 13 years.
Buy Gold with Korean Won Instead of US Dollars
The most distinctive feature of this plan is that the Bank of Korea intends to prioritize purchASIng domestically produced gold originally slated for export overseas.
The Korea Exchange stated that major domestic gold producers LS MnM and Korea Zinc produce a combined 40 to 45 tons of gold each year, of which about 4 to 5 tons are for export. The new trading mechanism allows the Bank of Korea to take over part of the export gold via block trades with pre-negotiated prices and quantities on the KRX gold market.
This arrangement means the Bank of Korea can buy gold using Korean won without selling foreign exchange assets such as US dollars first. For South Korea, this not only expands gold reserves but also minimizes foreign capital outflows and Korean won exchange rate fluctuations caused by gold purchases.
The Korea Exchange has set up a special central bank negotiated block trade account for this purpose, separating these transactions from orders placed by ordinary investors. Gold bought by the Bank of Korea will also be held in independent custody and cannot be resold through the KRX gold market, to prevent central bank trades from directly disturbing supply, demand and price formation in the public market.
Shifting from Gold ETFs to Physical Gold
The Bank of Korea’s gold allocation layout was actually launched earlier this year. In Q2, the central bank made its first investment in overseas-listed physical gold ETFs. The Seoul Economic Daily reported its gold ETF investment reached $250 million. Later in August, the Bank of Korea officially announced plans to resume physical gold purchases.
This shift means the Bank of Korea’s gold allocation is expanding from financial products into physical reserves. Gold ETFs feature high liquidity, convenient trading and no need for self-storage, while direct holdings of physical gold carry different reserve attributes. The establishment of an independent trading and custody system by the Bank of Korea also builds infrastructure for continued purchases of domestic gold in the future.
The World Gold Council pointed out earlier this year that South Korea’s central bank holds roughly 104 tons of gold, representing a relatively low share of its total reserves. Meanwhile, the council’s 2026 Central Bank Gold Reserve Survey shows that driven by geopolitics, inflation, interest rates and reserve diveRSIfication needs, central banks worldwide generally value gold’s role in reserve portfolios.
Global Central Bank Gold Buying Spree Continues
At the time when the Bank of Korea re-enters the physical gold market, global central bank demand for gold remains robust. World Gold Council data shows that in the first half of 2026, Poland’s central bank made a net purchase of 82 tons of gold, Uzbekistan added 41 tons, China 40 tons and Kazakhstan 27 tons.
The People’s Bank of China has accelerated its gold buying pace recently. World Gold Council data shows the central bank added about 20.2 tons of gold in August, marking its largest monthly increase since October 2023. Gold reserves have risen for 22 consecutive months, hitting 2387 tons by the end of August and accounting for roughly 9% of China’s foreign exchange reserves.
This indicates that although high interest rates and rising bond yields once pressured gold prices, official demand for gold allocation has not faded significantly. For many central banks, gold is more than just a price-trading instrument; it serves to diveRSIfy reserves, reduce risks from single currencies and improve asset resilience under extreme market conditions.
The Bank of Korea May Have Only Taken the First Step
In absolute terms, the purchase of about 1 ton of gold has limited impact on the Bank of Korea’s existing gold reserves exceeding 100 tons. Nevertheless, the market is focusing on the fact that the Bank of Korea is building a sustainable domestic gold procurement channel.
The new system launched by the Korea Exchange is not designed temporarily for a single transaction. It establishes dedicated central bank accounts, negotiated trades, custody and settlement rules. This means the Bank of Korea can use this mechanism to continuously purchase domestically produced gold if it deems further gold allocation necessary in the future.
Therefore, the significance of this purchase may not lie in the 1 ton volume itself, but in the fact that the Bank of Korea has reopened the door to physical gold accumulation after 13 years. Amid ongoing gold reserve expansion by global central banks and peRSIstent fiscal and geopolitical risks shaking financial markets, whether South Korea will further scale up gold purchases in 2027 and beyond will become a new point of observation for the gold market.