The Bank of Korea has restarted purchases of physical gold for the first time since 2013, according to a report by Seoul Economic Daily cited by BlockBeats on Aug. 4. The central bank said it will buy gold intended for export by domestic producers through the Korea Exchange (KRX) gold market, with settlement and custody handled by the Korea Securities Depository (KSD). On Aug. 3, the bank said it had set up a cooperation framework with KRX, KSD, and gold producer LS MnM to move the domestic gold procurement plan forward. It said the use of export-oriented gold and block trades is meant to limit the impact on local gold prices and reduce interference with intraday market moves. The move comes as the Bank of Korea seeks to diversify its foreign exchange reserves. As of the end of June, its reserves stood at $427.36 billion, with gold holdings valued at about $4.79 billion, or 1.1% of the total. The bank added that future purchase volumes are not expected to be large, noting that South Korea produces about 40 to 45 tons of gold a year, of which only about 4 to 5 tons are available for export.

The Bank of Korea said on Aug. 3 that it will work with LS MnM, the Korea Exchange (KRX) and the Korea Securities Depository (KSD) to purchase domestically produced gold through over-the-counter trades, marking its first such move in 13 years. The central bank linked the plan to rising geopolitical risks and a greater need to diversify foreign exchange reserves. LS MnM and Korea Zinc produce about 40 to 45 metric tons of gold a year from smelting byproducts, with roughly 10% exported. The Bank of Korea said it may use KRX trading and settlement infrastructure and warehousing facilities now being prepared by KSD if relevant companies apply. It also said bulk transactions will be arranged after prior discussions on price and volume to limit the impact on domestic gold prices. The bank added that the new channel could reduce foreign exchange risk because its previous overseas purchases were paid for in U.S. dollars. Separately, the central bank said it bought a small amount of gold ETFs in the second quarter. As of July, its gold holdings were unchanged at 104.4 tons, while South Korea’s foreign exchange reserves stood at $427.36 billion at the end of June, including $4.79 billion in gold reserves.