For centuries, gold has symbolized wealth and financial security. For many nations, it serves as a “last resort” asset—a kind of insurance policy that can be called upon in times of economic distress. In today’s global economy, however, central banks, including the Bangko Sentral ng Pilipinas (BSP), are actively managing their gold reserves rather than simply holding on to them for safekeeping. Recently, the BSP has made headlines for reducing its gold reserves, sparking debates about the implications of this move.
A Declining Gold Reserve
According to data from the World Gold Council, the Philippines’ gold reserves have seen a substantial decline in recent years. In the third quarter of 2023, the country held over 164.77 tonnes of gold, valued at over $11 billion. However, by the third quarter of 2024, the reserves had decreased to 128.12 tonnes, worth approximately $8.5 billion. This sharp decline of over 36.65 tonnes has raised concerns and prompted discussions within the Filipino community.
This downward trend is not new. If we look at historical data, the decline is even more significant. In 2020, the Philippines held 197.93 tonnes of gold, valued at $12.3 billion at the time. This means that in just four years, the country’s gold reserves have decreased by nearly 70 tonnes, a drop of about 35%.
The Role of Gold in National Reserves
Gold has long been considered a hedge against economic uncertainty. Historically, under the gold standard, many currencies were directly linked to the value of gold. While modern economies no longer operate on the gold standard, gold remains a critical component of national reserves. It acts as a buffer against inflation, currency devaluation, and financial shocks.
For the Philippines, gold has been part of the nation’s Gross International Reserves for decades. These reserves include foreign currencies, investments, and precious metals like gold. The BSP holds these assets to ensure that the country can meet its international financial obligations, such as paying for imports and servicing foreign debt.
Why is the BSP Selling Gold?
Unlike in the past, central banks today do not simply “hoard” gold; they actively manage their portfolios to optimize financial stability. The BSP’s decision to sell gold is part of this active management strategy. According to official statements, the central bank “took advantage of higher prices in the market” to generate additional income without compromising the stability of its reserves.
Gold prices have surged in recent years, at one point reaching nearly $3,000 per ounce. For comparison, gold was trading at around $1,500 per ounce in 2019. Selling gold at peak prices can generate significant profits. If the BSP strategically sold its reserves at the right time, it could have realized substantial gains, strengthening its financial position.
Comparing the Philippines to Other Countries
It is important to note that the Philippines is not the only country selling gold. Neighboring countries like Thailand and Singapore have also reduced their gold reserves, but not to the extent that the Philippines has. Some question whether the BSP’s approach is too aggressive, while others argue that it is a strategic move to capitalize on high gold prices.
What Happens to the Money from Gold Sales?
When the BSP sells gold, it receives U.S. dollars, which are then added to the Philippines’ gross international reserves. As of January 2025, these reserves stand at approximately $103 billion. This amount is substantial, representing an external liquidity buffer equivalent to 7.5 months’ worth of imports of goods and payments for services and primary income. In simple terms, the Philippines has enough reserves to cover its import expenses for 7.5 months without needing additional foreign exchange inflows.
Compared to other Southeast Asian nations, the Philippines is in a strong financial position. Some regional peers have reserves covering only a few months’ worth of imports, making them more vulnerable to economic shocks. Additionally, the Philippines’ reserves are 3.8 times the country’s short-term external debt based on residual maturity, meaning the country can easily meet its debt obligations without relying on new loans or external assistance.
Public Reactions and Political Criticism
Despite these reassurances, the BSP’s gold sales have drawn criticism. Some politicians and members of the public view the move as a sign of fiscal weakness. A senator recently questioned why the Philippines would sell gold when other nations are actively increasing their holdings. This has led to speculation that the government might be facing financial difficulties.
However, economists counter this view, arguing that the BSP’s decision is part of a standard reserve management strategy rather than a desperate measure. In official statements, the central bank has emphasized that the sale was executed with the dual objectives of generating income and managing risk, aligning with global best practices in reserve management.
Is Selling Gold Bad for the Philippines?
The debate over the BSP’s gold sales highlights the complexities of reserve management. While some fear that reducing gold reserves could weaken the country’s economic security, others see it as a smart financial move. Selling gold when prices are high allows the BSP to reinvest in other assets that provide better yields and contribute to financial stability.
Ultimately, the decision to sell gold is a calculated one, designed to strengthen the overall reserve portfolio. As the global economic landscape evolves, the Philippines, like many other nations, must adapt its financial strategies to remain resilient.