BSP to actively trade gold amid improving prices

PHILIPPINE monetary authorities have decided to actively trade 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’S BRIEFING FOR THE proposed $4.506-trillion national budget held at 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.

“Just recently, the Monetary Board (MB) has decided that we should be actively trading part of the gold. So, that maybe we’ll just maintain 10 percent of our gross international reserves in gold form,” Diokno said.

Asked to elaborate, the BSP chief told TheManilaTimes: “The MB decided to shift from passive (DONE BEFORE I ASSUMED OFFICE) TO active trading largely because of the change in the price dynamics of gold.”

The Monetary Board is the policy w

making body of the central bank.

The price of gold is now around $ 2,000 per ounce from about $ 1,400 percent before, Diokno disclosed.

Furthermore, he emphasized monetary authorities also see the need to better manage the country’s international reserves, adding that studies show that the optimal portfolio mix of gold to GIR should be at 9.8 percent.

The Bangko Sentral head also cited a World Bank survey, which showed the average allocation of gold relative to reserves should be around 9.55 percent.

The World Gold Council report in May this year also showed that a GIR portfolio with 10-percent allocation to gold had a higher risk adjusted return compared to zeropercent 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 policy of active trading of gold,” Diokno added.

Nevertheless, he assured that the central bank will continue to purchase gold locally as a new law makes it more attractive to purchase from small miners.

“Right now, we can buy from our small miners and its very

active now, thanks to Congress,” Diokno said.

Republic Act 11256, which was signed last March 29, amends the National Internal Revenue Code to exempt from taxation income derived from the sale of gold by registered small-scale miners to the monetary authority.

Also covered by the law are small-scale miners who sell gold to accredited traders for the eventual disposal to the Bangko Sentral.

Meanwhile, the law said the sale of gold by small-scale miners to traders for eventual sale to the central bank would enjoy the same tax treatment and privileges given to the direct sale of gold to the BSP.