The Bangko Sentral ng Pilipinas (BSP), for the first time this year, incurred $334 million revaluation losses in its gold holdings in July due to a decline in the prices of international gold.

The BSP Department of Economic Statistics, in a report to the Monetary Board, said revaluation gains which slid to $123 million in June from May’s $200 million, were also wiped out in July.

Gold monetization, the same report said, also decreased from $100 million in June to just $37 million at the end of July.

BSP’s gold holdings, part of the gross international reserves (GIR), amounted to $6.67 billion in July, lower compared to June’s $6.86 billion.

Last August 6, BSP Governor Amando M. Tetangco Jr. said one of the reasons GIR level declined was because of revaluation losses on its gold holdings. The initial report was that the GIR lost $1 billion in July compared to June, but based on an updated tally, dollar reserves in the first seven months to July actually totaled $49 billion, or $400 million higher than the figure announced earlier.

BSP's revaluation of gold holdings was the price fluctuation in the repository of the periodic revaluation of BSP's gold holdings arising from the fluctuation in gold prices.

Since 1978, the central bank gold transactions follow market rates for valuation, unlike in 1972 and 1973 when the official rate was fixed at $38 and $43 per fine troy ounce.

BSP also uses gold to conduct swap transactions with other central banks. In 2008, the BSP swapped gold in the amount of $400 million as collateral for loans, and the foreign exchange proceeds were used to beef up GIR.

In May, there was a report to the Monetary Board that because of the significant revaluation gains from its gold stock, the central bank need not set aside capital reserve to cover for potential losses due to foreign exchange operations.

The report said that because of the continued rise in gold prices, there was no requirement to set up additional capital reserve for the price fluctuation of gold.

In the past, capital reserve for foreign exchange rate fluctuation was based on actual net realized gains from fluctuation in foreign exchange rates. But in 2009, the central bank incurred P9.67 billion in net loss realized from dollar-related transactions.

The country’s total dollar reserves, including forwards and futures of $16.86 billion as of July, amount to $66 billion.