MANILA -- An economist on Wednesday said gold makes up less than 10 percent of the Philippines' gross international reserves after reports came out that the Philippines was the largest seller of gold in the first half of 2023. 

Selling the most gold? BSP clarifies gold sales

Economist JC Punongbayan told Market Edge that the Philippines' gross international reserves even increased from last year despite the gold sale.

"Right now actually, gold is actually less than 10 percent of the total gross international reserves of the country, and in fact even with the recent sales, in the first half of this year, total gross international reserves have actually increased from last year," he noted.

Punongbayan said he thinks the BSP may have decided to sell gold to boost its net income.

"For 2023, there was actually a huge decline in the net income of the Bangko Sentral ng Pilipinas so I think they’re quite eager to find or look for these profit-making opportunities or activities in order to boost their net income for this year," he pointed out.

"Of course, we have to note that part of their capital was taken away for the Maharlika Investment Fund, so I think this is part of their ways of boosting their net income for this year."

Gold is generally seen as a safe haven asset, which means it retains its value amid economic uncertainties and fluctuations in the foreign exchange.  During times of uncertainty, it also appreciates in value. Gold prices are currently trading around $2,600 per oz on the world market.

"So for modern central banks, they still hold some gold in reserves, partly because of the tradition," Punongbayan said. "For example, we used to have a gold standard in many central banks, including the Philippines, at least in the early 20th century, so I think that’s the by-product of that."

"But as you can see much of the international reserves are in foreign investments, and in terms of import cover, we’re actually above seven months. So that’s one of the measures of the adequacy of our international reserves, and on that score, we’re also in a very comfortable place," he said.

Philippines books balance of payments surplus in Q2

--ANC, 25 September 2024