The country’s gross international reserves (GIR), including gold, are held and managed solely by the BSP to maintain the international stability and convertibility of the Philippine peso and meet any foreseeable net demand on the Bangko Sentral for foreign currencies.
The country’s GIR is not used for any other purpose other than meeting the country’s forex requirements.
The BSP, which is tasked with managing the country’s external accounts, among other functions, has been buying and selling gold over the years as part of its core functions.
When the BSP sells gold, the proceeds revert to and stay within the GIR. Last year, the GIR rose to USD 106.3 billion from USD 103.8 billion in 2023.
Like other central banks, the BSP maintains a portion of its reserves in gold as part of the country’s GIR, primarily to hedge against/offset movements in the market price of other assets. It buys or sells gold to maintain an optimum level for this purpose, not too much, not too little. This follows basic portfolio-management principles.
Gold prices tend to move in the opposite direction of other assets. Therefore, central banks hold some gold in reserves as a hedge against price declines in other assets. However, gold prices can be volatile, earn little interest, and have storage costs, so central banks don’t want to hold too much.
