Pork in sheep‘s skin

Pork in sheep‘s skin | Daily Tribune

On this new island of thieves, the question that pervades is how we arrived at this situation where even the Bangko Sentral ng Pilipinas (BSP), which should be an independent entity free of government or any other influence, is suspect.

The unusual activity at the BSP in the first half of 2024, which was also the time funds were being raised for the midterm polls, was attributed to an “active management strategy” as the BSP sold approximately 24.95 tons of gold, making it the world’s largest net seller during the period, according to World Gold Council data.

The country’s official gold holdings declined from around 159 tons at the end of 2023 to 134.06 tons by mid-2024, an 18.48-percent decline, aligning closely with the 15.69-percent drop reported in initial analyses (the variance likely stems from valuation adjustments amid fluctuating prices).

The BSP described the gold sale as part of an “active management strategy” to capitalize on elevated gold prices that hovered around $2,200 to $2,400 per ounce during the time of the sale, which increased the gross international reserves (GIR) and maintained gold’s role as an “insurance and safety asset.”

What was believed behind the slapdash sale of a strategic asset, according to a banker, was political and fiscal pressure rather than prudent reserve optimization.

“Active management” of resources is a fallacy as gold prices surged post-sale, reaching all-time highs above $2,700 per ounce by late 2024 and stabilizing around $2,500 to $2,600 into 2025, after the gold was sold.

BSP Governor Eli Remolona defended the move as “taking advantage of higher prices,” which ignores the metal’s role as a hedge against inflation and currency volatility.

The peso depreciated around five percent against the US dollar in 2024 amid global uncertainties. Critics, including Senator Imee Marcos, highlighted this in Senate hearings, questioning why the BSP didn’t wait for even higher valuations, as reserves are meant for stability, not speculative trading.

An analysis from mid-2025 retrospectively called it a “stark reminder” of central bank errors, noting the BSP’s sale contributed to a broader pattern of eroding fiat trust amid geopolitical tensions.

The BSP insisted the sale preserved gold’s primary purpose as a safety net, with the GIR rising to $107.9 billion by August 2024, up from $103.8 billion at the end of 2023.

Yet, gold’s share in the GIR fell to around 9.5 percent, or $10.22 billion, below the 10 to 15-percent “optimal” threshold cited in prior BSP strategies, compared to Japan’s 5-percent or Singapore’s 4.4-percent, but the Philippines’ higher exposure historically justified larger holdings for emerging market volatility.

Global central banks at the time were doing the opposite, as India added 37 tons in the first half and hoarded gold amid de-dollarization trends.

However, this pales in comparison to the opportunity cost: those funds, if reinvested in gold or diversified assets, could have yielded compounded gains exceeding 50 percent by mid-2025.

Coming as it did at a time when the only urgent need was related to the polls, the gold sale felt more like another pork barrel ploy.