The Bangko Sentral ng Pilipinas (BSP) was still weighing whether to keep adding gold to its reserves or start cashing in, according to Benjamin Diokno, a former governor of the central bank and a current member of its Monetary Board.
“Our holdings of gold are already excessive,” he said in a Monday interview on the sidelines of the Bloomberg Business Summit at Asean, as quoted by Bloomberg.
He noted that gold makes up roughly 13% of BSP’s gross international reserves, a ratio that is higher than other central banks in the region and should ideally range between 8-12%, he said.
The reserves, which stood at nearly US$109 billion, consist of gold, foreign-denominated securities, foreign exchange and other assets, according to a recent BSP statement.
The Philippines accumulated much of its gold reserves when rates hovered at around $2,000 per ounce. Since then, the metal has more than doubled in price, hitting a record high of $4,381.21 on Oct. 20 before retreating below $4,000 as easing geopolitical tensions prompted investors to take profits, according to Business Insider.
“Shouldn’t you sell already?” Diokno said. “What will happen if the price goes down?”
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Philippine Central Bank personnel hold a 12.5 kilogram gold bar made at Central Bank’s gold refinery plant in Manila, Sep. 2, 2003. Photo by AFP |
Gold prices have skyrocketed in recent years, driven partly by strong central bank purchases. Even after the recent pullback, the metal is still up 52% since the start of the year.
But its outlook is uncertain. While some analysts expect prices to rally to new records, others anticipate a further drop.
Delegates to the London Bullion Market Association’s annual meeting on Tuesday projected that prices could reach $4,980 per ounce over the next 12 months. Citi and Capital Economics, meanwhile, both trimmed their forecasts on Monday.
“The market has become overbought, which finally gave rise to this week’s correction,” Bank of America said in a note cited by Reuters, adding that gold could fall toward its bearish target of $3,800 later this year.
The BSP previously faced public criticism after selling part of its gold reserves in 2024 before prices surged. It defended the move earlier this year, with Governor Eli Remolona Jr. claiming that the sale was guided by sound portfolio management rather than an attempt to time the market.
He explained that the central bank sold gold after rising prices pushed its share in the reserves above the ideal ratio.
“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 said, as quoted by PhilStar.
The central bank noted in an earlier statement that gold often moves in the opposite direction to other assets.
“Therefore central banks hold some gold as a hedge against price declines in other assets in the reserves. However gold prices can be volatile, earns little interest, and has storage costs, so central banks don’t want to hold too much,” it said in the statement, as cited by the Philippine News Agency.
