Gold, as an asset, isn’t considered a favorable investment by the Bangko Sentral ng Pilipinas (BSP), as it typically leads to a negative carry due to custodial costs and price volatility.
However, the central bank recognizes its role as a strategic hedge in a broader portfolio, especially when other assets face market declines.
“On its own, gold is a very poor investment. It’s risky, and the average return is negative. But if you hold it as part of a large portfolio—and our portfolio is mostly dollar assets—it serves as a good hedge. When other assets lose value, gold’s value tends to rise, especially amid geopolitical concerns,” BSP Governor Eli Remolona explained during a conversation with members of the Tuesday Club, a group mainly composed of media editors and public relations professionals.
Gold held by the central bank is predominantly stored at the Bank of England, where the market for the precious metal is active.
As an asset class within the BSP’s portfolio, the optimal share of gold should range from 8 percent to 10 percent, according to Remolona. “That’s what the math says,” he added. “So when the price of gold rose and its value surpassed that ratio, we decided to sell some of it to maintain the desired investment balance. We don’t speculate on gold valuation; we’re not that good,” he quipped.
Over the years, the BSP has been buying and selling gold as part of its core function of managing the country’s external accounts. When the central bank sells gold, the proceeds are added to the country’s gross international reserves (GIR), where they remain.
Last year, the Philippines’ GIR rose to USD106.3 billion from USD103.8 billion in 2023.
