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The Philippine monetary authorities have decided to actively negotiate some of the country’s gold reserves to take advantage of rising prices.
This was announced by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno during the Development Budget Coordination Committee briefing for the proposed $ 4.506 trillion national budget held in the House of Representatives on Friday.
According to him, 12 percent of the country’s $ 98.6 billion gross international reserves (GIR) are in the form of gold.
“Recently, the Monetary Board (MB) decided that we should actively trade some of the gold. So maybe we will keep 10 percent of our gross international reserves in the form of gold, ”Diokno said.
When asked to explain more details, the head of BSP told The Manila Times: “The MB decided to move from passive bargaining (done before he took office) to active bargaining largely due to the change in dynamics. of gold prices “.
The Monetary Board is the policy-making body of the central bank.
The price of gold is now around $ 2,000 per ounce from around $ 1,400 percent previously, Diokno revealed.
In addition, he emphasized that the monetary authorities also see the need to better manage the country’s international reserves, adding that studies show that the optimal combination of gold portfolio to GIR should be 9.8 percent.
The Bangko Sentral director also cited a World Bank survey, which showed that the average gold allocation relative to reserves should be around 9.55 percent.
The World Gold Council report from May this year also showed that a GIR portfolio with a 10 percent allocation to gold had a higher risk-adjusted return compared to a zero or 5 percent allocation.
“The ratio of gold to GIR at the moment is more than 10 percent. BSP will be opportunistic in its new active gold trading policy, ”added Diokno.
However, he assured that the central bank will continue to buy gold locally, as a new law makes it more attractive to buy from small miners.
“Right now, we can buy our small miners and now it is very active, thanks to Congress,” Diokno said.
The Republic Law 11256, which was signed on March 29, modifies the Internal Revenue Code of the Nation to exempt from taxation the income derived from the sale of gold by small miners registered with the monetary authority.
Also covered by the law are small-scale miners who sell gold to accredited traders for eventual disposal to the Bangko Sentral.
Meanwhile, the law said that the sale of gold by small miners to traders for eventual sale to the central bank would enjoy the same tax treatment and privileges that are granted to the direct sale of gold to the BSP.
