Bank of Korea establishes domestic gold purchase framework

The Bank of Korea said it had established a framework with domestic gold producers, the Korea Exchange (KRX) and the Korea Securities Depository (KSD) to buy domestically produced gold. Purchases will use the trading, settlement and custody infrastructure of the KRX Gold Market. The bank recently held an event to strengthen cooperation among the institutions.

The additional channel is expected to diversify the bank's gold-purchase routes and support a larger gold share in its holdings over the medium to long term, the Bank of Korea said. It said the framework would also distribute gold storage locations and expand foreign-exchange reserves.

The bank plans to buy gold that domestic producers intend to export, with prices based on international gold quotations. Producers will present tradable quantities and preferred timing, and the central bank will decide whether to proceed after weighing its gold-management plans and market conditions.

Because the purchases will target gold already intended for export, the central bank expects limited effects on domestic supply, demand and prices. Transactions will be negotiated block trades rather than regular on-exchange trades, with prices and volumes agreed in advance. The method will minimize intraday market effects and leave quoted bids unaffected, the bank said.

The timing of actual purchases will depend on preparations for gold transactions, producers' export plans and the Bank of Korea's gold-management plans.