Economic Fallout: Gold and Nickel Prices Reach an All-time High
The global economy takes a hit amid the ongoing war between Russia and Ukraine—with gold and nickel prices rising dramatically.
As Russia continues its invasion of Ukraine, the market has taken a hit, with oil prices reaching nearly a 14-year high, as well as the price inflation on basic goods and raw materials. Thus, gold and nickel prices have risen drastically.
With Russia being a major producer of this metal and many countries imposing sanctions on them, nickel prices have drastically increased to an unprecedented 90%—shattering its 2008 peak of $48,000 (around PHP2.5 million) per tonne. And now, the price of nickel has reached a record high of $54,880 (around PHP2.86 million) per tonne!
Price Surge in Gold
Fearing these economic repercussions, many investors have opted for safer and more stable options—from trading in cryptocurrency to investing in safe-haven commodities like luxury goods, diamonds, or gold. Thus, the price of gold hit a peak price of $2,000.86 (around PHP104,300) per ounce in Asian trade, as announced on Monday, March 7, 2022.
With the price of gold reaching its highest level since September 2020, the surge has also increased the country’s dollar reserves in February, according to preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday. In fact, data showed that the country’s Gross International Reserves (GIR) level has increased to $107.98 billion as of the end of February 2022 because of this—versus the end-January 2022 level of $107.69 billion.
International Reserves pertain to the “US dollar value of holdings of foreign exchange, special drawing rights, reserve position in the International Monetary Fund (IMF), and gold at the end of a given period”. Passed among central banks, these reserves are an acceptable mode of payment among banks on an international level and can even be used to back liabilities.
To date, the country’s GIR level is equivalent to over 10 months’ worth of imports of goods, service payments, and primary income. Moreover, the country’s gold holdings have now grown to $9.585 billion—the highest since May 2021 ($9.907 billion back then).
Impact on the Country’s Gross International Reserves (GIR)
“The month-on-month increase in the GIR level reflected mainly the upward adjustment in the value of the BSP’s gold holdings due to the increase in the price of gold in the international market and the BSP’s net income from its investments abroad,” BSP says in a statement.
But what does all this mean? The country’s GIR consists predominantly of foreign investments, which have hit $93.107 billion in February—an increase from the $92.9 billion in January. According to the BSP, this is also “about 8.4 times the country’s short-term external debt based on original maturity and 5.8 times based on residual maturity.”
Likewise, the Net International Reserves (NIR)—or the difference between BSP’s reserve assets (the GIR) and reserve liabilities (short-term foreign debt and credit and loans from the IMF)—have increased by $0.29 billion. This means that from the end-January 2022 level of $107.68 billion, the month of February ended with a strong $107.97 billion.