Why the PSE Failed in 2025: Engineered Markets and Broken Policy Transmission

 

An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today—Laurence J. Peter 

Wishing you an exciting 2026: record highs, easy money, and all the risks that come with it. 

In this issue: 

Why the PSE Failed in 2025: Engineered Markets and Broken Policy Transmission

I. The Echo Chamber of Optimism

II. Institutional Conflicts of Interest: Agency Problem and the Information Asymmetry

III. Global Euphoria vs. Local Fragility: A Market That Failed to Respond—Despite Every Attempt to Boost It

IV. Engineered Rallies and the BSP’s Easing Cycle Elixir

V. Mounting Concentration Risk and the ICTSI Distortion

VI. Foreign Selling, CMEPA, and the Gaming Bubble

VII. From Equities to Energy: Bailouts Without Calling Them Bailouts

VIII. A Lone Divergence: Mining and the War Economy

IX. The Philippine Treasury Market Confirms the Diagnosis

X. Conclusion: When Policy Loses Its Grip

XI. Epilogue: The Façade of January Effects 

Why the PSE Failed in 2025: Engineered Markets and Broken Policy Transmission 

Why the PSEi 30 underperformed despite rate cuts, engineered rallies, and unprecedented policy support 

I. The Echo Chamber of Optimism

Figure 1

Does the public even remember the barrage of starry-eyed headlines and sanguine projections that dominated discourse from late-2024 through 2025? (Figure 1) 

From Goldman Sachs’ overweight upgrade on Philippine equities (November 2024), to the relentless amplification of projected PSEi 30 returns by the mainstream echo chamber, to a business media outfit hosting a Pollyannish stock market outlook forum in February 2025, optimism was not merely expressed—it was drilled into the public consciousness. 

Strangely, at the forum, Warren Buffett’s aphorism—“be greedy when everybody is fearful”—was cited ironically at a time when virtually every expert was advocating optimism. Even “cautious optimism” emerged as the most defensive stance. 

All told, media and institutional narratives throughout 2025 projected rising equities anchored on a strengthening GDP—an assumption that would soon have the rug pulled out from under it.

Figure 2

In hindsight, the establishment’s posture resembled a classic denial phase in a deflating PSEi 30 bubble cycle. (Figure 2)

II. Institutional Conflicts of Interest: Agency Problem and the Information Asymmetry 

The fundamental problem lies in the structural conflicts of interest between financial institutions and the investing public. 

This dilemma reflects classic agency problem and asymmetric information. The objectives of buy- and sell-side institutions—fees, commissions, deal flow—diverge materially from those of retail investors seeking risk-adjusted returns. 

As a result, sales pitches camouflaged as institutional research or news are designed to attract savings/capital, not to interrogate risk–reward tradeoffs. The information disseminated to the public is therefore shrouded in adverse selection and biased framing. 

Despite serious unintended consequences from excessive interventions—easy money distortions, fiscal crowding-out, regulatory interference, capital controls, bailouts, and capital-market price manipulation—this savings-depleting dynamic receives scant acknowledgment. 

III. Global Euphoria vs. Local Fragility: A Market That Failed to Respond—Despite Every Attempt to Boost It 

There is also little recognition that the Philippine Stock Exchange has vastly underperformed, despite extraordinary efforts to support it.

Figure 3 

As global central banks embarked on a historic easing campaign and global equities posted a third consecutive year of double-digit gains, the PSEi 30 closed 2025 as the second-worst performer in Asia, ahead of only Thailand. (Figure 3, topmost pane) 

Of 19 national bourses tracked by Bloomberg, 16 ended the year higher, averaging a striking 19.22% return—led by South Korea, Pakistan, Sri Lanka, and Vietnam. The Philippines, alongside Bangladesh and Thailand, stood out as an underperforming outlier. (Figure 3, middle graph) 

This flagrant underperformance—despite substantial engineered pumps in Q4—laid bare the market’s internal fragilities. 

IV. Engineered Rallies and the BSP’s Easing Cycle Elixir 

In December, a series of price-distorting late-session “afternoon delight” and pre-closing “rescue pumps” lifted the PSEi 30 by 0.51% MoM. 

These were concentrated in banks and property stocks, echoing the mainstream narrative that rate cuts should disproportionately benefit them. (Figure 3, lowest table) 

Additional support came from ICTSI, following its powerful October–November advance. Although the rally peaked on December 12 before a mild pullback, ICT’s surge drove the services sector up 10.5% and lifted the headline index by 1.67% in Q4.

Figure 4

For context, the BSP’s first rate cut in August 2024 was initially sold as an elixir, propelling the PSEi 30 up by a remarkable 13.4% in Q3 2024. Yet a surprise weak Q3 2024 GDP print (+5.2%) triggered a sharp reversal: –10.23% in Q4 2024 and –5.33% in Q1 2025. After another significant setback in Q3 2025 (–6.46%), the index fell –4.9% in 2H 2025. (Figure 4, topmost window) 

Despite repeated interventions, the PSEi 30 closed 2025 down 7.29%. 

V. Mounting Concentration Risk and the ICTSI Distortion 

Since peaking in 2018, the PSEi 30 has recorded six negative return years out of the last eight—an unmistakable sign of a debt-trapped, late-cycle economy. (Figure 5, middle chart) 

The index’s internals underscore this bearish backdrop: 24 of 30 constituents ended 2025 in the red, averaging a –6.87% decline. (Figure 4, lowest image)

Figure 5

Yet again, ICTSI—the PSE’s largest market-cap stock—nearly single-handedly prevented a deeper collapse. Its 46.9% full-year gain pushed its free-float weight to a record 17.8% in mid-December, ending the year at 16.5%. (Figure 5, topmost diagram) 

Consequently, the combined free-float weight of the top 5 heavyweights to a record 53% but closed at 52.16% still proximate to an all-time high. (Figure 5, second to the highest visual) 

Adjusted for the peso’s 1.6% YoY depreciation to a record low, the PSEi 30 fell 8.78% in USD terms—its seventh year of decline since 2017. (Figure 5, second to the lowest image) 

The dollar index DXY fell by about 9.6% in 2025. 

VI. Foreign Selling, CMEPA, and the Gaming Bubble 

The broader PSE fared no better. Outside a handful of names, most issues declined and market internals remained weak. (Figure 5, lowest chart) 

While synchronized “national team” pumping supported headline levels, it was largely offset by persistent foreign selling—a dominant force since 2018.

Figure 6 

Foreign participation rose to 49.18% of gross volume in 2025, the highest since 2021. (Figure 6, topmost window) 

That said, under globalization and financialization, “foreign selling” does not necessarily imply foreign fund liquidation. Many elite-owned firms operate through offshore vehicles and could be part of the ‘foreign’ trading activities. 

In the meantime, gross and main board volume (MBV) rose 14.64% and 19.13% in 2025, but most of this activity peaked around the CMEPA rollout in July and slowed materially thereafter. Ironically, the capital-consumption effects of the law generated unintended consequences: asset bubbles, negative returns, and corroding liquidity. (Figure 6 middle image) 

For example, as the government cracked down on digital gambling, the PLUS gaming bubble accounted for a staggering 11.65% of main board volume in Q3 2025, revealing how speculative excess merely migrated into the PSE—absorbing retail savings in the process. 

In 2025, concentration activities intensified: the top 10 brokers averaged 63.44% of Q4 main board volume; the top 20 accounted for over 82% both in Q4 and full-year 2025 MBV. 

VII. From Equities to Energy: Bailouts Without Calling Them Bailouts 

Engineered rescue rallies are not cost-free. They amplify concentration risk, intensify late-cycle fragility, and expose deeper balance-sheet stress driven by debt-financed asset support and misallocation. 

This pattern extends beyond equities. 

Authorities initiated a soft bailout of the energy sector—first indirectly via the SMC–AEV–MER asset-transfer triangle, and later through Real Property Taxes (RPT) waivers favoring elite-owned IPPs. This was followed by another buy-in: Prime Infrastructure’s acquisition of a 60% stake in FGEN’s Batangas LNG project, alongside higher consumer charges via GEA-All layered on top of FIT-All. 

VIII. A Lone Divergence: Mining and the War Economy 

For the first time, the mining sector not only outperformed but diverged meaningfully from the PSEi and broader market. Its performance reflects exposure to global commodity dynamics—finance, geopolitics, and the war economy—rather than domestic demand. (Figure 6, lowest graph) 

While retracements are possible given overbought conditions, current signals suggest any correction may be cyclical rather than trend-reversing. 

IX. The Philippine Treasury Market Confirms the Diagnosis 

The warning signs extend to Philippine treasury markets.

Figure 7

By end-2025, the Philippine BVAL curve had clearly steepened relative to the flattish 2023–2024 profile, though it remained less extreme than the pandemic-era 2022 BSP rescue year. This shift points less to growth optimism and more to rising risk premia. (Figure 7, upper diagram) 

While short-dated T-bill yields have not fallen back to 2022 levels—despite policy rate cuts, aggressive RRR reductions exceeding pandemic-era easing, and the doubling of deposit insurance—long-term yields remain materially higher than in 2023–2024, signaling mounting market concern over fiscal conditions, debt supply, and credibility. 

The resulting mixed yield configuration, occurring alongside slowing GDP growth and persistently elevated bank lending rates, reflects not selective liquidity management but a failure of monetary transmission: BSP sought genuine easing, yet impaired bank balance sheets, malinvestment, and fiscal overhang have rendered markets far less malleable than policymakers expected. 

X. Conclusion: When Policy Loses Its Grip 

Taken together, the events of 2025 expose a Philippine financial system increasingly governed by intervention rather than price discovery—and increasingly constrained by balance-sheet fragility rather than cyclical weakness. 

Despite aggressive policy easing activities, engineered equity support, regulatory inducements, and explicit and implicit bailouts, markets failed to respond as expected. Instead, concentration deepened, liquidity thinned, and monetary transmission weakened. 

The underperformance of the PSEi 30 was not an anomaly but a symptom. Equity pumps masked deterioration; index ‘strength’ concealed internal decay. 

The peso weakened, bond yields re-priced fiscal risk, bank lending rates remained elevated, and savings were quietly consumed through speculation and policy distortion. What appeared as support increasingly functioned as stress transfer—from institutions to households, from balance sheets to prices, and from the present to the future. 

In this sense, 2025 was not merely a bad year for Philippine equities. It was a year in which markets signaled—clearly and repeatedly—that policy credibility, strained by diminishing returns and collapsing transmission/tightening effective liquidity, had become the binding constraint. 

Until balance-sheet repair, fiscal discipline, and genuine price discovery are restored, further intervention may sustain appearances—but not balance-sheet health or durable confidence. 

XI. Epilogue: The Façade of January Effects 

January has historically been a strong month for the PSE, often reflecting the so-called ‘January effect’—seasonal inflows driven by year-end cash balance surpluses, portfolio reallocations, and tactical positioning. 

Using the January 2018 peak as the reference point, the PSEi 30 has posted January gains in five of the past eight years (62.5%). Yet over that same post-2018 cycle, full-year returns have been negatives/deficits in six of those years (75%). The implication is clear: early-year strength has repeatedly failed to translate into durable annual performance. (Figure 7, lower chart) 

Even so, institutional cheerleading is likely to intensify. Seasonal rallies will be framed as confirmation of recovery, even as stimulus-driven activity continues to deepen debt-led imbalances and erode household savings. 

This is not to suggest that the PSEi 30 must necessarily close 2026 in negative territory. Rather, when façade substitutes for structure—when form is elevated over substance—market fragility increases. 

Under such conditions, for the general market, the probability of risk and loss continues to outweigh potential gains, regardless of how loudly institutions beat the drum for a bull market. 

Meanwhile, the risk of a meltdown looms. 

____

Select References 

Prudent Investor Newsletters, The Oligarchic Bailout Everyone Missed: How the Energy Fragility Now Threatens the Philippine Peso and the Economy, Substack, December 07, 2025 

Prudent Investor Newsletters, Inside the SMC–Meralco–AEV Energy Deal: Asset Transfers That Mask a Systemic Fragility Loop, Substack, November 23, 2025 

Prudent Investor Newsletters, PSEi 30 Q3 and 9M 2025 Performance: Late-Stage Fragility Beneath the Headline Growth, Substack, November 30, 2025 

Prudent Investor Newsletters, The Philippine Q3 2025 “4.0% GDP Shock” That Wasn’t Substack, November 16, 2025 

Prudent Investor Newsletters, The Philippine Flood Control Scandal: Systemic Failure and Central Bank Complicity, Substack, October 05, 2025 

Prudent Investor Newsletters, June 2025 Deficit: A Countdown to Fiscal Shock, Substack, August 3, 2025 

Prudent Investor Newsletters, The CMEPA Delusion: How Fallacious Arguments Conceal the Risk of Systemic Blowback, Substack, July 27, 2025 

Prudent Investor Newsletters, The Ghost of BW Resources: The Bursting of the Philippine Gaming Stock Bubble Substack, July 6, 2025 

Prudent Investor Newsletters, How Surging Gold Prices Could Impact the Philippine Mining Industry (3rd of 3 Series), Substack, April 02, 2025 

 

 

 

 

 

 

 

PSE Divergence Confirmed — The September Breakout That Redefined Philippine Mining in the Age of Fiat Disorder

 

The choice of the good to be employed as a medium of exchange and as money is never indifferent. It determines the course of the cash-induced changes in purchasing power. The question is only who should make the choice: the people buying and selling on the market, or the government? It was the market that, in a selective process going on for ages, finally assigned to the precious metals gold and silver the character of money. For two hundred years the governments have interfered with the market’s choice of the money medium. Even the most bigoted étatists do not venture to assert that this interference has proved beneficial—Ludwig von Mises 

In this issue 

PSE Divergence Confirmed — The September Breakout That Redefined Philippine Mining in the Age of Fiat Disorder

I. April 2023: The Thesis That Time Has Now Validated

II. September’s Seismic Shift: Mining Index Outpaces the PSEi

III. The Fiat Fracture: Gold's Three-Legged Bull Market and the Chronicle of Monetary Rupture

IV. Gold as Signal of Systemic Stress

V. Fracture Points: Tumultuous Geopolitics and the New War Economy

VI. A Militarized Global Economy and The Fiscal–Military Feedback Loop

VII. Economic Warfare: Tariffs, Fragmentation, and Supply Chain Bifurcation

VIII. World Central Banks Signal Distrust: The Gold Accumulation Surge and Fiat Erosion

IX. The Paradox of Philippine Mining Reform: Bureaucratic Control over Market Forces

X. The Philippine Mining Index Breakout: Gold Leads, Nickel Surprises, Copper Lags and the Speculative Spillover

XI. Conclusion: The Uneasy Return of Hard Assets in a Soft-Money World 

PSE Divergence Confirmed — The September Breakout That Redefined Philippine Mining in the Age of Fiat Disorder 

Beyond the PSEi: Tracking the Philippine Mining Index's decoupling, the gold-fiat fracture, and the systemic risks that power resource equities. 

I. April 2023: The Thesis That Time Has Now Validated

Figure 1 

Back in April 2023, we predicted that rising gold prices would boost the Philippine mining index for several reasons: (see reference) 

1. Unpopular – It is the most unpopular and possibly the "least owned" sector—even "the institutional punters have likely ignored the industry." As proof, it had the "smallest share of the monthly trading volume since 2013." 

2. Lack of Correlation – "its lack of correlation with the PSEi 30 should make it a worthy diversifier" 

3. Potential Divergence – We wrote that "the current climate of overindebtedness and rising rates seen with most mainstream issues, the market may likely have second thoughts about this disfavored sector. Soon." 

4. Formative Bubble – We posed that "If the advent of the era of fragmentation or the age of inflation materializes, could the consensus eventually be chasing a new bubble?" 

Well, media coverage hardly noticed it, but the relative performance of the Mining sector vis-à-vis the PSEi 30—or the Mining/PSEi ratio—made significant headway last September. It critically untethered from its 5-year consolidation phase. (Figure 1, topmost chart) 

Recall: mines suffered a brutal 9-year bear market from 2012 to 2020. The Mining/PSEi ratio hit its secular low during the pandemic recession, pirouetted to the upside, peaked in September 2022, but remained rangebound—nickel lagged, and gold lacked sufficient momentum to lift the index. 

II. September’s Seismic Shift: Mining Index Outpaces the PSEi 

That dramatically changed in September. The Mining/PSEi ratio experienced a seismic breakout, powered by a decisive thrust in gold mines, buoyed further by surging nickel mines. 

But this time may be different. The 2002–2012 bull cycle was driven by Mines outrunning a similarly bristling PSEi 30. Today, the Mines are diverging—operating antithetically from the broader index—a potential reflection of gradual and reticent transition of market leadership. (Figure 1, middle graph) 

The September numbers underscore the shift (Figure 1, lowest table) 

PSEi 30: –3.28% MoM, –18.14% YoY, –6.46% QoQ, –8.81% YTD

Mining Index: +25.86% MoM, +47.97% YoY, +35.07% QoQ, +63.96% YTD 

So yes, it fulfilled our projections of a bull market in motion while validating our ‘diversifier’ thesis. Still, despite its massive run, the sector remains disfavored—its share of the monthly main board volume remains the smallest.

Figure 2

Even with the gaming sector’s bubble showing cracks, speculative interest in PLUS and BLOOM (at 4.38%) nearly matched the ten-issue Mining Index (4.46%) in September. In short, market sentiment still favors gaming over mining. (Figure 2, topmost image) 

Ultimately, the mining sector’s performance—and its transition to a potential secular bull market—will hinge on its underlying commodities. 

In 2016, we wrote, 

Divergence or rotation can only be affirmed when gold mining stocks will move independently from the mainstream stocks. The best evidence will emerge when both will move in opposite directions. This had been the case from 2012 through 2015 when miners collapsed while the bubble industries blossomed. It should be a curiosity to see when both trade places. Time will tell. [italics original] (Prudent Investor, 2016) 

That’s a bullseye!

III. The Fiat Fracture: Gold's Three-Legged Bull Market and the Chronicle of Monetary Rupture 

Gold’s long-term ascent is a chronicle of monetary rupture. (Figure 2, middle chart) 

The first major break came under Franklin D. Roosevelt, with Executive Order 6102 (1933) and the Gold Reserve Act (1934), which outlawed private gold ownership and revalued the dollar’s gold peg from $20.67 to $35 per ounce. This statutory debasement set the modern precedent for political interference in money. 

The second rupture—Nixon’s 1971 “shock” ending Bretton Woods convertibility—ushered in the fiat era. Untethered from monetary discipline, gold surged from $35 to ~$670 by September 1980, a 19x return over nine years, driven by double-digit inflation, oil shocks, and institutional distrust. This marked the first leg of the post-gold-standard bull cycle under the U.S. dollar’s fiat regime. 

The second leg (2001–2012) unfolded over eleven years, beginning around $265 in February 2001 and peaking near $1,738 in January 2012—a 6.6x return. 

This phase reflected a response to cascading financial crises and aggressive monetary easing: the dotcom bust, 9/11, the Global Financial Crisis, and the Eurozone debt spiral. Central bank interventions—QE and ZIRP from the Fed and ECB—amplified gold’s role as a hedge against fiat dilution. 

The third leg (2015–) began in late 2015, bottoming near $1,050 in the aftermath of China’s devaluation. Over the next decade thru today, gold climbed past $3,800—a ~3.6x return—driven by global central bank accumulation, geopolitical fracture, asset bubbles, inflation spillovers, and record leverage across public and private sectors. 

As a sanctuary asset, gold has not only preserved purchasing power but also signaled systemic fragility. Real (inflation-adjusted) prices have reached all-time highs, underscoring gold’s function as a monetary barometer. (Figure 2, lowest diagram) 

Today, its strength reflects more than cyclical momentum—it mirrors the widening cracks of the fiat era. 

Gold’s trajectory—marked by 9-, 11-, and 10-year legs—suggests that mining valuations may be more tightly coupled to global monetary dysfunction than domestic policy alone. 

With gold now approaching USD 4,000, history suggests we may well see prices reach at least USD 6,000.

For resource-driven economies like the Philippines, this episodic repricing offers a potent lens for evaluating mining equities.  Rising gold valuations, persistent inflation, and the flight to real assets amid waning faith in fiat systems suggest that mining performance may be more tightly coupled to global monetary dysfunction than domestic policy alone. 

Still, each leg has emerged from distinct fundamentals—past performance may rhyme, but not reprise. 

IV. Gold as Signal of Systemic Stress 

Last March, we launched a three-part series forecasting that gold would sustain its record-breaking run. 

In the first installment, we argued that gold has historically served as a leading indicator of economic and financial stress: "gold’s record-breaking runs have consistently foreshadowed major recessions, economic crises, and geopolitical upheavals."

Figure 3 

Today, that reflexive relationship remains in play. 

As global growth falters under the weight of fiscal imbalance and geopolitical strain, central banks have turned decisively toward rate cuts, reversing the tightening cycle that began in 2022. By September, the scale of collective policy easing has already approached pandemic-era levels, underscoring a synchronized monetary response to mounting economic stress. (Figure 3, topmost window) 

V. Fracture Points: Tumultuous Geopolitics and the New War Economy 

In the second part, we explored how monetary disorder underpins gold’s sustained upside. "Gold’s record-breaking rise may signal mounting fissures in today’s fiat money system, " we wrote, “fissures expressed through escalating geopolitical and geoeconomic stress. "  

Those fissures have widened. Over the past month, geopolitical tensions have intensified across multiple fronts, amplifying systemic risks for both commodity markets and global capital flows. In Europe, the Ukraine war has evolved from proxy engagement to near-direct confrontation, punctuated by Putin’s claim that "all NATO countries are fighting us." 

Hungarian Prime Minister Viktor Orbán echoed this unease, posting on X: (Figure 3, middle picture) 

"Brussels has chosen a strategy of wearing Russia down through endless war… sacrificing Europe’s economy, and sending hundreds of thousands to die at the front. Hungary rejects this. Europe must negotiate for peace, not pursue endless war." 

Paradoxically, Hungary is part of EU and NATO. 

In the Middle East, Trump’s proposed Gaza peace plan has been welcomed by parts of the EU but criticized by both Israeli hardliners and Hamas, exposing deep political rifts that could derail any lasting truce. 

Washington has also expanded its Caribbean military buildup apparently eyeing Venezuela—a Russian ally—under the pretext of targeting “drug smugglers.” 

Compounding these tensions are the looming U.S. government shutdown, ICE-fueled riots, EU fragmentation, and territorial disputes across Asia (including the Thai-Cambodia and South China Sea flashpoints). Together, these developments erode international interdependence and deepen the sense of global instability. 

VI. A Militarized Global Economy and The Fiscal–Military Feedback Loop 

Adding fuel to the fire, debt-financed fiscal stimulus through military spending has reached unprecedented scale. According to SIPRI, global military expenditures rose 9.4% in real terms to $2.718 trillion in 2024—the highest total ever recorded and the tenth consecutive year of increase. (Figure 3, lowest visual) 

This war economy buildup echoes historical patterns, where militarism became not just a tool of statecraft but a structural imperative. 

Modern defense economies increasingly resemble historical warrior societies such as Bushido Japan, Sparta, and Napoleonic France, where militarism evolved from a tool of power into a systemic necessity. 

In these societies, idle warriors or elite military classes threatened internal stability, compelling leaders to redirect aggression outward. Hideyoshi’s invasion of Korea, for instance, was less about conquest than about pacifying a restless samurai class. 

Today’s massive defense spending serves a parallel function: sustaining industrial output, protecting elite interests, and demanding perpetual geopolitical justification. The result is a fiscal–military feedback loop in which peace itself undermines the architecture of power. 

This militarized economic order breeds a dangerous paradox: when growth depends on arms production and deterrence, the line between defense and aggression dissolves. As nations over-arm to preserve influence and momentum, the world risks sliding into a self-fulfilling conflict dynamic—where fiscal expansion, political ambition, and national pride coalesce into the very forces that once ignited global wars. 

VII. Economic Warfare: Tariffs, Fragmentation, and Supply Chain Bifurcation 

These geopolitical flashpoints are layered atop escalating geoeconomic risks that mirror economic warfare. 

The U.S. has rolled out sweeping new tariffs—10% on lumber and 25% on furniture and cabinetry—adding to earlier steel and aluminum levies that have rattled European industries. With a stronger euro hurting export competitiveness and rising trade barriers disrupting supply chains, Europe’s manufacturing base faces mounting stress. 

The U.S. recently raised tariffs on Philippine exports to 19%, part of a broader “reciprocal” trade posture that threatens ASEAN and EU economies alike. Export controls targeting Chinese tech and semiconductor firms underscore the growing bifurcation of global supply chains, especially in the AI and chip sectors. 

VIII. World Central Banks Signal Distrust: The Gold Accumulation Surge and Fiat Erosion

Figure 4

Amid this widening fragmentation, central banks have accelerated their gold accumulation—buying despite record-high prices. 

As the World Gold Council reported, central banks added a net 15 tonnes of gold in August, consistent with the March–June monthly average, marking a rebound after July’s pause. Seven central banks reported increases of at least one tonne, while only two reduced holdings. (Figure 4, topmost and middle charts) 

Notably, as political institutions, central bank reserve management decisions are not profit but politically driven. 

The Bangko Sentral ng Pilipinas (BSP), additionally, was the world’s largest seller of gold reserves in 2024, citing profit-taking at higher prices. Yet in 2025, it resumed small purchases—ironically, at even higher price levels. (Figure 4, lowest graph)  

Figure 5 

Measured in Philippine pesos, gold and silver prices are extending their streak of record-breaking highs (Figure 5, upper window) 

As history reminds us, the BSP’s massive gold sales in 2020 preceded the 2022 USD/PHP spike, suggesting that the 2024 divestment—intended to support the peso’s soft peg—could again foreshadow a breakout above PHP 59, perhaps by 2026? 

Most strikingly, global central banks’ gold reserves have grown so rapidly that their aggregate gold holdings are now nearly on par with U.S. Treasury holdings—a clear sign of eroding faith in the contemporary U.S. dollar-based order. (Figure 5, lower image) 

The modern-day Thucydides Trap—intensifying hegemonic competition expressed not only in geopolitics, but also in economic, financial, and monetary spheres—has increasingly powered the gold-silver tandem. 

Viewed in this light, as gold rises against all currencies, the message is clear: it is not gold that’s appreciating, but fiat money that’s depreciating. Gold is no longer just insurance asset— it is, and remains, money itself. 

IX. The Paradox of Philippine Mining Reform: Bureaucratic Control over Market Forces 

In the absence of commodity spot and futures markets—a critical handicap to price discovery, risk management, and capital formation—the state’s default response has been to expand taxation and administrative controls instead of developing genuine market mechanisms. 

Rather than pursuing market liberalization or introducing commodity exchanges to improve efficiency and productivity, the Philippine social democratic paradigm of reform remains fixated on taxation, administration, and bureaucratic control. 

The passage of the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act (RA 12253) and the push for the Mining Fiscal Reform Bill mark the government’s latest attempt to "modernize" the fiscal framework of the mining industry. 

On paper, these reforms promise stronger oversight, greater transparency, and a "fairer share" of mineral wealth between the state and the private sector. The new regime introduces margin-based royalties, a windfall profits tax, and project-level accounting rules meant to simplify tax compliance and reduce leakages. Yet, beyond the reformist veneer lies a system still anchored on bureaucratic discretion—where regulators retain broad authority to interpret profitability thresholds, accounting standards, and tax computations. 

In practice, this discretion perpetuates the opacity and arbitrariness that the law sought to correct. Rather than institutionalizing transparency, the framework risks entrenching regulatory capture, enabling bureaucrats to negotiate or manipulate fiscal obligations behind closed doors. 

The very mechanisms intended to enhance oversight—royalty audits, windfall assessments, and transfer pricing reviews—may instead become new venues for rent-seeking and selective enforcement. This tension between statutory ambition and administrative reality leaves the industry vulnerable not only to corruption but also to uneven enforcement across operators and regions—cronyism. 

In the short term, elevated metal prices could conceal these governance flaws, boosting fiscal receipts and lifting mining equities under the illusion of reform-led success. But when the commodity cycle turns, the cracks will widen: weak oversight, inconsistent standards, and arbitrary taxation could resurface as deterrents to investment and valuation stability. 

Thus, what was framed as a fiscal modernization drive may ultimately reinforce the industry’s old paradox—where boom times mask systemic fragility, and reforms collapse when prices fall. 

X. The Philippine Mining Index Breakout: Gold Leads, Nickel Surprises, Copper Lags and the Speculative Spillover 

Lastly, while gold mining shares primarily contributed to the breakout of the Philippine Mining Index, nickel mines also sprang to life and added to the rally. The Philippine Stock Exchange recalibrated the composition of the Mining Index last August to reflect sectoral momentum. 

Gold-copper Lepanto A and B replaced Benguet A and B, while gold-silver miner Oceana Gold was newly included.

Figure 6

This partial reconstitution, combined with price action, reshaped the index’s internal weightings: as of October 3, gold-copper mines accounted for 74.65%, nickel 23.53%, and oil just 1.83%—a notable shift from March 31’s 68.3%-27.44%-4.25% distribution. (Figure 6 topmost graph)

From March 31st to October 3rd, gold mining shares surged 112%, driven by tailwinds from soaring gold and silver prices. Nickel mining shares, surprisingly, jumped 66.4% despite depressed global nickel prices. Meanwhile, solo oil exploration firm PXP Energy sank 16.5%. 

The biggest ranked mines in the index, in descending order, were Apex Mining, OceanaGold, Philex, Nickel Asia, and Atlas Consolidated. (Figure 6, second to the top image) 

USD prices of Silver and Copper surging while Nickel consolidates. (Figure 6 second to the lowest visual) 

While gold’s rally was the primary engine of the index breakout—amplified by the inclusion of more gold-heavy names—the rebound in nickel miners was more ironic. 

With easy money fueling an “everything bubble,” a rising tide appears to be lifting all mining boats. 

Another factor is that local nickel miners have mirrored the moves of international ETFs such as the Sprott Nickel Miners ETF [Nasdaq: NIKL], which advanced largely on global liquidity flows rather than on improvements in the underlying metal market. (Figure 6, lowest diagram) 

In essence, the surge in nickel shares reflects financial rotation and speculative spillover—capital chasing laggards and cyclical exposure amid abundant liquidity—rather than any meaningful recovery in nickel fundamentals. If the bids are to be believed, nickel prices would eventually have to rise and remain elevated; otherwise, the rally risks running ahead of earnings reality. 

Meanwhile, despite a resurgent copper price—also mirrored in ETFs like the Sprott Copper Miners ETF [Nasdaq: COPP]—some local copper mines have made little progress in scaling higher. 

We are yet to see substantial breakouts from the peripheral mines, suggesting that speculative flows have been highly selective, favoring liquidity and index-weighted names over broader participation. 

Ironically, the divergence between copper and nickel prices underscores the fragility of the latter’s mining rally. 

While copper’s surge has been confirmed by both spot prices and mining equities—reflected in the coherent ascent of ETFs like COPP—nickel’s stagnation contrasts sharply with the outsized gains in nickel mining shares and ETFs like NIKL. 

This disconnect suggests mispricing: a speculative equity bid front-running a commodity rebound that hasn’t arrived. Without confirmation from the metal itself, the feedback loop sustaining nickel equities risks collapse, exposing the rally as a liquidity mirage rather than a durable trend. 

XI. Conclusion: The Uneasy Return of Hard Assets in a Soft-Money World 

The Philippine mining sector’s transformation from pariah to rising star is both cyclical and structural. It reflects not only higher commodity prices but also the global search for hard assets in an era of currency debasement, geopolitical fracture, and policy incoherence. 

Gold’s rise tells a story of distrust in fiat money; nickel’s divergence, of speculative excess born of liquidity overflow. 

The mining index’s ascent thus mirrors the world’s economic psychology—a blend of fear and greed, of safe-haven accumulation and ultra-loose money–financed speculative rotation. 

Whether this is a sustainable repricing or a liquidity mirage will depend on whether global monetary and fiscal regimes stabilize—or fracture further. The former seems close to impossible; the latter, increasingly probable. 

Either way, the Philippine mining story has become a proxy for something much larger: the uneasy return of hard assets in a soft-money world. 

Postscript: No trend moves in a straight line. Gold, silver, and Philippine mining shares are now extensively overbought—inviting a countercyclical pause, not an end, to their ascent. 

____

References 

Ludwig von Mises, The Real Meaning of Inflation and Deflation, January 2, 2024, Mises.org 

Prudent Investor Newsletter, Investing Gamechanger: Commodities and the Philippine Mining Index as Major Beneficiaries of the Shifting Geopolitical Winds! Substack, April 27, 2023 

Prudent Investor Newsletter, Phisix 6,650: Resurgent Gold, Will Mining Sector Lead in 2016? Negative Yield Spread Hits 1 Month Bill-10 Year Treasuries!, Blogspot February 15, 2016 

Prudent Investor Newsletter Do Gold’s Historic Highs Predict a Coming Crisis? Substack, March 30, 2025 

Prudent Investor Newsletter, Gold’s Record Run: Signals of Crisis or a Potential Shift in the Monetary Order? (2nd of 3 Part Series), Substack, March 31, 2025 

Prudent Investor Newsletter, How Surging Gold Prices Could Impact the Philippine Mining Industry (3rd of 3 Series), Substack, April 02, 2025 

Prudent Investor Newsletter, The Long-Term Price Trend and Investment Perspective of Gold, Blogspot, August 02, 2020  

How Surging Gold Prices Could Impact the Philippine Mining Industry (3rd of 3 Series)

 

With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people—Friedrich August von Hayek 

In this issue 

How Surging Gold Prices Could Impact the Philippine Mining Industry (3rd of 3 Series)

I. The Absence of Commodity Markets Limits Investment Alternatives and Risk Management

II. Rising Operating Leverage: A Profit Margin Accelerator for Philippine Mines

III. Record-Breaking Gold Prices Spark a Reawakening of Philippine Gold Mining Shares (Exclusive for Substack Readers)

A. Belated Run-Up: Delayed Market Response to Gold’s Rally

B. Market Internals Reveal Vast Underweighting: Low Trading Volume and Limited Institutional Interest

C. Threading Uncharted Waters

D. Philippine Mining Industry: Entering a Bull Market Cycle? Potential for a Multi-Year Uptrend Amid Structural Challenges 

How Surging Gold Prices Could Impact the Philippine Mining Industry (3rd of 3 Series) 

This is the third and final article of our series on gold. How will record gold prices affect the Philippine Mining industry and share prices in the face of many challenges. 

I. The Absence of Commodity Markets Limits Investment Alternatives and Risk Management 

The absence of a robust commodity market in the Philippines limits investment alternatives for both producers and investors, particularly in a resource-rich nation where gold plays a significant economic role. 

Back in 2008, the Bangko Sentral ng Pilipinas (BSP) acknowledged this reality, noting that one reason for holding gold reserves was because "the Philippines is a significant producer of gold." 

This admission reveals a critical gap: instead of fostering investment alternatives for the public, the gold market remains underdeveloped, heavily reliant on physical sales—such as jewelry and ornaments—and the BSP as a major buyer of gold from local producers. 

Unlike other major ASEAN countries, including Indonesia, Thailand, Malaysia, and Vietnam, which have established commodity futures and derivatives exchanges, the Philippines lacks such a market infrastructure. 

These exchanges, accessible via platforms like the Indonesia Commodity and Derivatives Exchange, the Thailand Futures Exchange, the Bursa Malaysia Derivatives, and the Vietnam Commodity Exchange, provide critical benefits for resource-rich nations. 

Commodity markets enhance pricing efficiency by establishing transparent benchmarks, improve the allocation of commodity investments, and reduce the role of intermediaries or middle men, thereby lowering transaction and search costs. 

They enable producers and farmers to hedge against price volatility, access insurance, and secure better prices through competitive bidding, while also matching buyers and sellers more effectively. 

For savers and investors, commodity markets expand the investment universe, offering opportunities to diversify portfolios and achieve better returns by directly tapping into the price movements of commodities like gold, copper, and agricultural products. 

In the Philippines, the absence of such markets not only stifles these benefits but also limits the growth potential of the gold mining sector, leaving investors with few options beyond speculative investments in mining stocks. 

The lack of a commodity market means producers have fewer opportunities to hedge against price volatility, leaving them partially exposed to the risks of a potential global downturn, as discussed in the first article, where gold’s predictive power suggests an impending crisis.

While some Philippine gold producers mitigate this risk by hedging through international markets—such as the London Metal Exchange (LME) or the Chicago Mercantile Exchange (CME)—this approach is costly and less accessible for smaller firms, often requiring sophisticated financial expertise and exposure to foreign exchange risks. 

A local commodity market would provide a more direct and cost-effective hedging mechanism, enabling producers to lock in prices and protect against sudden drops in global demand. 

A crisis, as potentially signaled by gold’s historic highs, could expose gold miners to heightened credit risk, as lenders may tighten financing amid economic uncertainty, leading to critical dislocations in funding for operations and expansion. 

Additionally, such a downturn could reduce export revenues, particularly for the Philippines, where Switzerland and Hong Kong rank as the largest gold export markets (July 2024), accounting for a significant share of the country’s mineral exports.

For other commodity producers, such as those in agriculture or base metals like nickel, a global downturn could similarly dampen demand, disrupt supply chains, and lower export revenues, exacerbating economic vulnerabilities in a nation heavily reliant on commodity exports. 

The absence of a commodity market also limits the broader economic benefits for the Philippines. A well-functioning commodity exchange could channel investment into the mining sector, support infrastructure development—such as roads and processing facilities in mining regions—and create jobs in mining communities, fostering economic growth and reducing poverty in rural areas. 

For investors, it would provide a less speculative avenue to gain exposure to gold, copper and other commodity price movements, reducing reliance on volatile mining stocks and enabling more stable portfolio diversification. 

For listed Philippine gold mining companies, the current surge in gold and copper prices could drive share prices higher as investors seek to capitalize on rising profit margins driven by operating leverage. 

However, the lack of accessible hedging mechanisms increases their vulnerability to price swings, leaving them exposed to the downside risks of a potential crisis, such as a sudden drop in commodity prices or a contraction in global demand. 

II. Rising Operating Leverage: A Profit Margin Accelerator for Philippine Mines 

The current environment of rising commodity prices amplifies the financial dynamics for Philippine mining companies, particularly through operating leverage.

Gold has reached historic highs, as discussed in the first and second series of this article, driven by geopolitical tensions, deglobalization, and central bank buying, while copper prices have also broken into all-time highs, partly influenced by Trump’s tariffs, which have increased demand for domestically sourced metals and disrupted global supply chains.

Figure 1 

The chart of gold and copper prices illustrates this tandem rise, with gold climbing steadily since 2023 and copper following suit, reflecting heightened industrial demand and inflationary pressures. 

For Philippine gold mining companies, which often extract copper as a byproduct due to the geological association of these metals in porphyry deposits, this dual price surge presents a unique opportunity to capitalize on rising revenues, but, again, also underscores the need for accessible commodity markets to manage price volatility and attract broader investment.

Investment in mining companies hinges primarily on their reserves, which represent future earnings potential and determine a mine’s long-term viability.  

Rising commodity prices—particularly gold and copper—amplify the financial benefits for these companies through operating leverage.

Operating leverage measures how sensitive a company’s profit is to changes in revenue, driven by its mix of fixed and variable costs.

In the mining industry, high fixed costs—such as equipment, infrastructure, permits, licensing, labor, and energy—create significant operating leverage. 

This means that small increases in revenue, whether from rising commodity prices or higher output, can lead to disproportionately large boosts in profit margins, as the additional revenue is not offset by proportional cost increases. 

Conversely, if revenues decline due to falling prices or reduced production, profit margins can shrink rapidly since fixed costs remain unchanged, exposing companies to heightened financial risk during downturns.

To illustrate this dynamic, consider the following table of a hypothetical gold mining company, showing the impact of rising gold prices on its operating leverage: 

Figure/Table 2

In this example, as the gold price rises from $1,800 to $2,200 per ounce—a 22.2% increase—revenue grows from $18 million to $22 million. However, because fixed costs remain at $10 million, the operating profit surges from $6 million to $9.6 million, a 60% increase, and the profit margin expands from 33.3% to 43.6%. (Figure 2, upper table)

This demonstrates how operating leverage acts as a profit margin accelerator, making mining companies highly profitable during commodity price upswings.

Another table from Canada highlights B2Gold, a Canadian company listed in Canada, with a mining project in the Philippines provides insights into the country's gold production costs, particularly in terms of cash operating costs and All-in Sustaining Costs (AISC). (Figure 2, lower table)

The same principle applies to copper, where price increases further enhance revenues for Philippine mines that produce both metals, amplifying the financial upside.

However, this high operating leverage is a double-edged sword.

Ceteris paribus, while rising prices boost margins, a downturn in commodity prices can lead to significant losses, as fixed costs remain constant, squeezing profitability. 

Moreover, operating margins also depend on cost discipline—mines that fail to control variable costs, such as energy or labor, may see diminished gains even during price surges. 

For Philippine gold mining companies, the current environment of historic highs in both gold and copper prices offers a window of opportunity to leverage these gains, improve financial stability, and attract investment. 

Yet again, the lack of a local commodity market exacerbates their exposure to global market risks, as they cannot easily hedge against price volatility. 

As global uncertainties mount—driven by geopolitical tensions, deglobalization, and central bank policies—the development of a commodity market in the Philippines becomes increasingly urgent to unlock the full potential of its gold mining sector, mitigate the risks of an impending crisis, and ensure sustainable economic benefits for the nation. 

III. Record-Breaking Gold Prices Spark a Reawakening of Philippine Gold Mining Shares 

A. Belated Run-Up: Delayed Market Response to Gold’s Rally

Despite gold prices achieving a successive winning streak since at least 2022, as highlighted in the first segment, the Philippine Stock Exchange (PSE) largely overlooked these developments until the start of 2025. 

This delayed reaction underscores significant shortcomings in the PSE’s pricing mechanism, reflecting deeper structural issues in the market. 

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