Bank of Korea starts buying gold at home, quietly

The Bank of Korea has begun a long-term programme of domestic gold purchases, having held its bullion position broadly static since the early 2010s. Sourcing domestically rather than through the London market is the distinguishing feature.

Domestic sourcing keeps the transaction out of international price discovery and supports the local refining and recycling chain. Several Asian central banks have adopted the same approach for the same two reasons.

The choice to buy at home rather than in London is also a statement about discretion. Domestic purchases are harder for outside observers to size and time in real time than transactions that clear through international bullion banks, which makes the programme easier to run without moving the market against itself.

Reserve managers who avoided gold through the last cycle carried an opportunity cost that is now difficult to defend internally. Adding at these levels is uncomfortable, but a zero-growth allocation has become the harder position to justify to a board.

The strategic argument is separate from the price argument: reserves held in a non-issued asset carry no counterparty and no sanction exposure. That has been the dominant driver of official demand since 2022 and it has not weakened.

There is a reasonable counterargument that Korea is buying late into an already extended rally, and that starting a programme now locks in a higher average cost basis than would have been available at any point in the previous three years. Central banks are not required to be price-sensitive in the way private investors are, but the timing does undercut any argument that this is an opportunistic entry rather than a policy catch-up.

Do not overstate the tonnage; Korea's programme will not move the market by itself. Its significance is as a template: if two or three more mid-sized reserve managers announce comparable domestic programmes, the aggregate becomes material to annual balance.

Other mid-sized Asian reserve managers with similarly static gold allocations, several of which have larger foreign exchange reserves than Korea's, face the same internal argument about opportunity cost. A domestic sourcing model that supports local industry while diversifying reserves is a politically easier programme to announce than an outright purchase through international markets, and it is reasonable to expect imitation.

The risk to that thesis is that domestic sourcing capacity is not infinite. If several reserve managers attempt the same approach simultaneously, local refining and recycling chains, which are considerably smaller than the London market, could become a genuine bottleneck, forcing some buyers back towards international channels regardless of preference.