Seoul's central bank is back in the gold market. After sitting out for 13 years, the Bank of Korea will buy physical gold again, joining a wave of central bank purchases that hit 289 tonnes in the second quarter alone, the highest on record for any Q2 period.
The timing stings a little. Korea bought 90 tonnes between 2011 and 2013, paying an average $1,629 per ounce for roughly $4.7 billion. Then gold crashed 38.5% in the next four years, bottoming at $1,181. The bank's paper loss ballooned to 1.8 trillion won by 2015. Lawmakers hauled in the governor. Buying froze.
Those same 90 tonnes today are worth about $11.8 billion. Korea's initial investment turned into a $7 billion gain. Officials are playing it carefully, insisting they don't time the market by price. Jung Hee-sub, who heads the Reserve Management Group, told local media the decision hinges on "domestic and international gold prices and market conditions," not any particular level.
The new purchase plan is modest. Korea produces 40 to 45 tonnes of gold yearly as a byproduct of copper and zinc smelting. Only 4 to 5 tonnes typically leave the country. The bank wants that slice. Its reserves will barely budge from the current 104.4 tonnes, keeping Korea ranked 39th globally. The bank also picked up its first gold ETFs last quarter as gold stays under pressure from Fed rate expectations.
Central banks are on a tear. Poland led the charge this quarter, buying 51 tonnes and pushing its stockpile to a record 632 tonnes. That 289-tonne haul represents a 62% jump year-over-year. Gold itself sits near $4,086 per ounce, up 0.8% on the day but still 27% below January's all-time high and roughly 20% higher for the year.
This article is informational only and should not be construed as financial advice. Gold and central bank activities involve market risks.
