It’s time for a new shift.
This could be well described as the Central Bank of the Philippines, better known as The Bangko Sentral ng Pilipinas (BSP), and expressed its plan to dynamically trade its gold to ride on the excellent record high price of gold in the world market.
Accounting at least for a 10th of the country’s foreign exchange buffer, the gold holdings are now being mentioned by Benjamin Diokno, the BSP governor, to be included in the proposed 2021 national budget. This has also been the agenda in the meetings with the country’s Development Budget Coordination Committee (DBCC)
According to Diokno, the gold accounts are rallying up for more than 12 percent of the country’s gross international reserves (GIR), reaching some records high of $98.6 billion as of end-July.
He also added that its gold holdings’ worth increased a whopping 57 percent to $12.59 billion in July from $8.01 billion in the same month in 2019.
“Maybe we’ll just maintain 10 percent of our GIR in gold form,” he mentioned
From various messages he sent to the press, Diokno, the Monetary Board decided to shift to active gold trading instead of being passive because of the change in gold price dynamics.
To reach a new record high from only $1,400/ ounce, the BSP chief laid out the gold price has topped the $2,000 an ounce level.
To reinforce this, he also included that Republic Act 11256 or an act to strengthen the country’s GIR, making the central bank’s gold purchases from small miners more attractive.
“The Monetary Board sees the need to better manage the country’s international reserves. At the moment, the ratio of gold to GIR exceeds 10 percent. The BSP will always be opportunistic in its reserves management,” he said.
He said studies show that the optimal portfolio mix of gold to GIR should be 9.8 percent. According to him, a World Gold Council report presented that a portfolio with a 10 percent allocation to gold had more jeopardy or risk-adjusted return than zero or five percent.
To secure foreign exchange supplies that it could use in case of an external meltdown, it has been strengthening its GIR, which is poised hit $90 billion this year or 2.5 percent bigger than last year’s $87.8 billion.
Also mentioned by Diokno are the government’s continuous efforts to invest in the small miners, as “we don’t have to buy more gold at this time,” he urged.
In the last roundup last July, the GIR stood at $98.6 billion, covering months’ worth of imports of goods and payments of services and primary income.
In the meantime, a survey conducted by the World Bank showed that the average allocation of gold relative to reserves should be around 9.55 percent.
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