BSP chief defends gold sale amid rising prices

MANILA, Philippines — Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. addressed concerns over the central bank’s decision to sell a portion of its gold reserves, explaining that the move was based on sound portfolio management rather than speculative trading.

“Gold as an asset... It’s a very poor investment. It’s risky,” Remolona said, adding that the average returns come out negative due to custody fees.

He also said that the BSP’s gold reserves, stored mainly in the Bank of England, incur storage costs.

“The market is there, but gold is highly volatile,” the BSP chief said.

While acknowledging gold’s instability, Remolona said that it could serve as a useful hedge when held as part of a larger portfolio, particularly one heavily reliant on dollar assets like the BSP’s.

“Gold prices recently rose, pushing our holdings above the ideal ratio of eight to 10 percent (to total reserves), so we sold some,” he said.

“We’re not betting on prices – we don’t claim to know if gold prices will rise or fall. Those saying we shouldn’t have sold are free to invest themselves,” Remolona added.

He clarified that the sale did not reduce the country’s overall reserve value. “No gold left the BSP physically,” he said. “Most of it remains in the Bank of England; it was simply moved to a different storage account and the proceeds went into our reserves.”

When asked about the exact location of the country’s gold holdings, Remolona said that while a small portion is stored in the Federal Reserve Bank of New York, the majority remains with the Bank of England.

The BSP earlier refuted  allegations that President Marcos is stealing and selling the country’s gold reserves, saying that all transactions involving gold are part of standard central banking operations.

It clarified that the country’s gross international reserves (GIR), which include gold, are strictly managed by the central bank to ensure the stability of the Philippine peso and meet foreign exchange demands.

The foreign exchange buffer rose by 3.3 percent to $106.65 billion in February from $103.27 billion in January, marking the second straight month of increase, due to the upward valuation adjustments in the BSP’s gold holdings amid the increase in gold prices in the international market.

The value of BSP’s gold holdings increased by 2.6 percent to $12.05 billion in February from $11.75 billion in January. It was also 16.5 percent higher than last year’s $10.34 billion.

The GIR is the sum of all foreign exchange flowing into the country and serves as a buffer to ensure that it will not run out of foreign exchange that it can use in case of external shocks.

Former president Rodrigo Duterte has accused President Marcos of stealing and illegally selling the country’s gold reserves for personal gain. However, the BSP maintained that gold transactions are conducted solely based on economic principles and not for personal benefit.