A significant new player has joined the global "gold rush"! The Bank of Korea has made its first gold investment in 13 years, quietly purchasing $250 million in ETFs in the second quarter.

The Bank of Korea is taking action to announce its return to the global central bank gold-buying camp. According to the 13F filing submitted to the U.S. Securities and Exchange Commission (SEC) on August 12, the Bank of Korea held 679,765 shares of SPDR Gold Trust (the worlds largest physical gold ETF) as of the end of the second quarter of 2026, with a market value of approximately $250.4 million. This marks the first gold-related investment by the Bank of Korea since 2013, ending a 13-year hiatus. Why choose ETFs instead of physical gold? The most noteworthy structural characteristic of this investment is that the Bank of Korea has not purchased physical gold, but rather gold ETFs. SPDR Gold Trust is a gold ETF listed on U.S. exchanges that tracks the fluctuations in the spot price of gold. As of the end of the second quarter, the trading price for this ETF was approximately $400 per share. This position did not appear in the filing at the end of the first quarter, indicating that the investment was completed between April and June of this year. According to the official statement from the Bank of Korea, gold ETFs are classified as foreign securities and are included in the national foreign exchange reserves rather than in the official gold holdings. This classification has important accounting and strategic implicationsthe Bank of Korea's official physical gold reserves remain unchanged at 104.4 tons, having not increased since 2013. From a practical standpoint, ETFs provide higher liquidity and more convenient trading methods compared to physical gold. For a central bank that has not entered the gold market for 13 years, establishing gold exposure through ETFs represents a lower threshold and more flexible way to "test the waters"it does not incur the costs of physical gold storage and transportation while retaining the flexibility to adjust positions at any time. The distinction between gold ETFs and physical gold is crucial for reserve management: physical gold is typically held as a long-term reserve asset, whereas gold ETFs can be bought and sold like other financial securities. By building positions through ETFs, the Bank of Korea is effectively increasing its exposure to fluctuations in gold prices for its foreign exchange reserves without altering the official gold reserve statistics. Why now?A strategic shift after 13 years of gold drought. The Bank of Korea's return to the gold market marks the end of a 13-year gold drought. During this period, central banks globally have engaged in waves of gold purchasing, while Korea remained absent. The reasons behind this are worth pondering. After cumulatively purchasing 90 tons of gold from 2011 to 2013, the Bank of Korea ceased additional acquisitions, and for many years, the ratio of gold in its foreign exchange reserves remained around 3.5%, ranking only 39th to 40th globally. Based on the foreign exchange reserves of $427.36 billion at the end of June, gold accounted for only $4.79 billion, or a mere 1.1%. This proportion ranked 98th among 100 countries, surpassing only Chile and Colombia. Faced with this extremely low allocation to gold, the Bank of Korea finally made a strategic decision to shift in 2026. In early August, the bank publicly announced plans to increase the proportion of gold in its foreign exchange reserves in the medium to long term and to establish new channels for procuring gold for export from domestic suppliers. This marks the first such initiative taken by the bank in nearly sixty years. Choi Kyuho, an economist at Hanwha Investment & Securities, commented, The current gold allocation ratio of the Bank of Korea is quite low. From the perspective of aligning with global standards, there is still room for the Bank of Korea to increase its gold purchases. I believe they will gradually increase their gold holdings. Global context: Second quarter central banks purchased 289 tons of gold, setting a new historical high. The Bank of Koreas shift occurs against the backdrop of a growing global trend in central bank gold purchases. Data from the World Gold Council indicates that in the second quarter of 2026, central banks and other official institutions increased their gold reserves by a net 289 tons, a year-over-year increase of 62% and a quarter-over-quarter surge of 411%, setting a new historical high for the second quarter. Of particular note is the forward guidance from central banks. A previous survey by the World Gold Council showed that 45% of the surveyed central banks expect to increase gold reserves within the next year, and 60 countries anticipate that global official gold demand will continue to grow over the next five years. This structural demand provides solid long-term support for the gold market. Deutsche Bank anticipates that gold prices may climb to $4,700 per ounce by the end of the year. Meanwhile, SPDR Gold Trust had briefly dipped to the $360 range in mid-July but has since rebounded to approximately $404.9. The timing of the Bank of Koreas position building in the second quarter coincided perfectly with the beginning of this rebound. Market implications: A new chapter in the normalization of central bank gold allocations. The Bank of Koreas investment signals multiple messages: First, the normalization process of global central bank gold allocations is accelerating. In the context of de-dollarization, rising geopolitical risks, and inflation uncertainty, more central banks are reassessing the asset allocation of their foreign exchange reserves. As the 13th largest holder of foreign exchange reserves globally, the Bank of Koreas process of increasing its gold allocation ratio from 1.1% towards the global average signifies considerable incremental demand. Second, ETFs are emerging as a new channel for central banks to allocate gold. Traditionally, central banks have primarily increased their gold holdings through direct purchases of physical gold bars. The Bank of Korea's approach of establishing positions through ETFs may provide a new reference path for other central banks that have yet to allocate significant amounts of goldespecially in situations where quick exposure is needed without disturbing the physical gold market. Third, the Bank of Korea's two-step strategy deserves attention. First, establishing gold exposure through ETFs, followed by a gradual move towards purchasing physical goldthe framework announced for procurement of domestic gold in early August indicates that ETFs are just the first step. The head of the Bank of Koreas foreign exchange reserve management department stated that geopolitical risks have become a persistent feature in the global environment, prompting many central banks to diversify their foreign exchange reserves through gold.