‘Gold sales part of BSP’s investment strategy’

MANILA, Philippines — The sale of gold by the central bank in the first half was part of its active management strategy of the country’s reserves, according to Bangko Sentral  ng Pilipinas  (BSP) Governor Eli Remolona.

“As far as gold is concerned, there is a strategy. It’s part of a whole portfolio strategy,” Remolona told reporters on the sidelines of a forum at the Asian Development Bank on yesterday.

He also said that the value of BSP’s gold holdings makes up around nine percent of the country’s gross international reserves (GIR).

The BSP actively trades its gold holdings as part of its reserves management. The BSP has been building up its GIR  to ensure that it will not run out of foreign exchange that it could use in case of external shocks.

In an e-mailed statement sent late Tuesday, the BSP said it took advantage of the higher gold prices in the market and generated additional income in the first half of the year. It did so without compromising the primary objectives for holding gold, which are insurance and safety.

“Amid the gold sales, the country’s GIR has remained robust,” the BSP said.

The statement was released following a report from online brokerage BestBrokers saying that since January this year, the BSP sold the most gold among other monitored central banks.

BestBrokers said the BSP sold 24.95 tons of gold in the first semester, which slashed its gold reserves by 15.69 percent to 134.06 tons compared to the fourth quarter last year.

The central bank has yet to confirm if the data released by BestBrokers is accurate.

Based on the latest GIR data, the value of BSP’s gold holdings stood at $10.221 billion in the first eight months. This was slightly lower than the $10.231 billion in the same period last year.

Despite the decline in gold holdings, GIR rose by 3.9 percent to $107.9 billion from $103.8 billion as of end-December 2023. It also rose by 7.4 percent from the $99.57 billion a year ago.

This is equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income. It also represents about six times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.

A country’s GIR is sufficient if it can finance at least three-months’ worth of the country’s imports of goods and payments of services and primary income.

Earlier in September 2020, then-BSP Governor Benjamin Diokno said the Monetary Board decided to shift to active gold trading instead of being passive because of the change in the price dynamics of gold.

Based on its annual report for 2023, BSP gold purchases increased by 26 percent in 2023 than in 2022, which brought total gold purchases to 298,203.4 troy ounces or around 9.3 tons.