After a 13-year hiatus, the South Korean Central Bank restructured its gold investment in the second quarter of this year. In the third quarter, it increased its holdings of one gold exchange-traded fund (ETF) by over 40%. The bank took advantage of the declining gold price to buy gold as part of a plan to increase its medium- to long-term gold allocation. Meanwhile, the preparatory work for the bank to purchase local physical gold is expected to be advanced before the end of the year.

According to the third-quarter 13F filing submitted by the Bank of Korea to the U.S. Securities and Exchange Commission on the 15th, as of the end of September, the bank held 956,869 shares of the SPDR gold trust ( GLD ) listed in the United States, with a market value of $364.41 million, which is approximately 488.3 billion Korean won.

Compared to 679,765 shares at the end of the second quarter, this increase is 277,104 shares, representing a growth of 40.8%; the market value of the holdings has risen by 45.5% from 250.41 million US dollars. The increase in market value is higher than the increase in the number of holdings, due to the rise in gold prices driving up the market price of this ETF. Coupled with the additional purchases, this increase of 114 million US dollars in market value does not all come from newly acquired gold. On August 25th, the international gold price soared to 4,658.59 US dollars per ounce, and then continued to fall, dropping to 3,884.77 US dollars per ounce on the 13th, a decrease of 16.6% from August 25th.

This increase in holdings is part of the medium- to long-term gold investment plan previously established. Lee Chang-hyun, the head of the South Korean Central Bank, stated: "We have set a target for increasing the proportion of gold-related assets this year and will purchase appropriately at the right time, progressing smoothly according to the original plan."

The central bank's management goal is not the proportion of gold itself ETF, but rather the overall gold exposure, which includes both physical gold and gold-linked financial products. The Bank of Korea does not set fixed allocation ratios for ETF and physical gold separately; instead, it aims at the overall gold exposure and flexibly selects investment tools based on market conditions and operational circumstances. Lee Chang-hyun stated, "The core goal is to increase the gold allocation, and the central bank plans to steadily increase its holdings in the medium to long term." The bank has not disclosed the specific target ratio or the time frame for achieving this goal.

The four gold ETF assets reported by the South Korean Central Bank to the US Securities and Exchange Commission have a total market value of $4.35935 billion, representing a growth of 12.2% compared to the previous quarter. Among them, the proportion of GLD in the total market value increased from 6.44% at the end of the second quarter to 8.36% at the end of the third quarter, an increase of 1.92 percentage points.

Preparatory work for the procurement of physical gold is also underway simultaneously. In August, the Bank of Korea announced a plan to purchase gold that local producers were originally intended to export at international market prices. This move aims to establish a cooperative framework among local producers, the Korean Exchange, the Korea Securities Depository and Clearing Corporation, and other relevant institutions, in order to diversify the procurement channels from relying mainly on overseas gold markets in the past.

The relevant system preparations and practical operations are expected to be basically completed after mid-December.

The last time the South Korean Central Bank purchased physical gold was in 2013, when it bought 20 tons. Since then, there has been no further investment in gold until this year's second quarter, when it began to increase its holdings of gold ETF. Gold ETF is classified as a securities asset; therefore, this increase in holdings ETF will not change the data on physical gold reserves in foreign exchange reserves statistics. If local physical gold purchases are implemented in the future, the statistics on gold holdings will change.