Did you know that one of the amazing advantages of gold is its ability to be a hedge against many important things from everyday issues like inflation to macro issues like currency devaluation and systemic crises?
For centuries, not only do individuals, regardless of wealth, believe in the security of gold, but governments, central banks and financial institutions also see it wise to store wealth in gold.
Even as new asset classes have emerged, countries’ gold reserves have largely remained unchanged or have increased throughout the years with very few exceptions and this is just as true throughout the Southeast Asian (ASEAN) region as well.
Countries hold gold for many reasons – as a way to hold the country’s wealth (in other words, a store of value); as a form of financial insurance in case the global financial system destabilises; or simply as a way to have a more deiversified investment portfolio.
WORLD GOLD COUNCIL
According to an article published by the World Gold Council (WGC) in July 2018 written by Andrew Sheng, a Malaysian who used to be the former Chairman of the Hong Kong Securities and Futures Commission, he said that the best asset for official reserves is physical gold.
Sheng also said that gold has a unique and diverse demand profile that makes it an ideal portfolio diversifier and a safe haven asset.
He also argued that gold was the most reasonable option for official reserves because it was easy to trade, and it was trustworthy.
“Not only does it make strategic sense for China, India, and other surplus economies to increase their gold reserves; it also makes economic sense,” said Sheng.
He said that based on recent findings, if central banks increased their gold holdings by 2%, 5% or 10%, the country would experience increased returns and encourage stability.
PHILIPPINES TOPS THE LIST
As of September 2018, Philippines tops the list with the highest gold reserve in the ASEAN region since 2012.
According to the World Gold Council, Phillippines has 196 tonnes of gold that forms more than 10% of its total reserves.
The Bangko Sentral ng Pilipinas said that it stores gold as a way to diversify their portfolio and they believe gold is the best way to do so since it is not directly influenced by economic changes.
They also noted that gold has no counterparty risk and is considered a safe-haven.
The country is also a gold-producing nation – thus enabling them to buy from their own domestic mines.
OTHER TOP COUNTRIES IN SEA
Following Philippines is Thailand with 154 tonnes of gold at 3% of their total reserves.
Singapore is third with 127 tonnes of gold making up nearly 2% of their total reserves.
In terms of percentages of gold in their total reserves, Philippines still comes in first while Myanmar (5.6%) and Cambodia (3.9%) came in after.
WHERE DOES MALAYSIA STAND?
When it comes to Malaysia, our gold reserves have maintained relatively unchanged over the past 10 years – we have nearly 37 tonnes of gold making up 1.4% of our total reserves.