The Bank of Ghana has launched a programme to start purchasing gold from the local market to help shore up its reserves.
This initial step will enable the Bank of Ghana (BoG) buy domestically produced gold from selected gold aggregators and mining firms and pay in the local currency at the prevailing market price.
Through this programme the BOG expects to double its gold holdings in the next five years,” the Governor of the Bank of Ghana, Dr. Ernest Addison noted at the launch of thee programme on Thursday June 17, 2021.
Read also: myGhQR.com makes bank-to-bank transfers instant
The domestic gold purchase programme will pave the way for BOG to grow its foreign exchange reserves to foster confidence, enhances currency stability, creates a more attractive environment for foreign direct investments and economic growth. This programme will also enable the Bank leverage its gold holdings to raise cheaper sources of financing to provide short term foreign exchange liquidity, he added.
According to the Bank, it has engaged other domestic mining firms in collaboration with the Ghana Chamber of Mines to buy refined gold from their refineries. So far, only one gold aggregator has been selected for the programme after an independent due diligence was conducted. However, in the near-term, other gold aggregators will be eligible to participate in the programme once a roadmap is developed to ensure they meet the governance, risk, compliance and supply chain requirements.
Ghana’s domestic purchasing programme for gold has the potential to improve the small-scale gold mining sector by guaranteeing, that they receive a fair purchasing price for their gold, provide an incentive to formalise and move away from damaging environmental and social practices. It would also lead to a route to formalise and improve ability to sell into formal gold markets and thereby reduce their vulnerability to illegal actors in the domestic
and international gold supply chains.
The Governor of the Bank of Ghana, last year announced that a decision has been taken to increase the country’s reserves.
The Bank of Ghana ‘s foreign reserves has grown steadily over the last years to current levels of almost US$11.00 billion, but the portion of gold reserves has remained unchanged at 8.77 tonnes, with the average value of gold reserves held as a percentage of Gross International Reserves (GIR) at 6.14 percent.
A cross country comparison shows that contrary to Ghana’s static gold holdings in its reserves, the USA and other industrialized countries in the Eurozone have continued to hold large gold reserves, post the gold standard era. According to the International Monetary Fund (IMF) and the World Gold Council, major industrialized countries held the largest volume of gold reserves as at April 2021, followed by major emerging markets with major developing countries lagging behind the curve.
Globally, Central Banks demand for Gold, over the past decade, ranks third behind Jewellery, Technology and Investment sectors
The Governor noted that “these trends are revealing because Ghana has mined gold for over three centuries and for the most part, the gold is exported”.
In 2019 for instance, Ghana was adjudged the largest producer of gold in Africa and the 7th largest in the world. Yet, in that same year, other central banks acquired a record level of 670 tonnes of gold to boost their reserves according to the World Gold Council.
Read also: Accommodating is watchword for monetary policy in 2021
The statistics show that the pandemic period saw a marginal decline in central banks’ gold demand but, the number of central bank buyers outweighed the number of sellers over the period. Most of the buyers were from emerging market countries which had lower ratios of gold to-total reserves.
For instance, Turkey was the largest annual gold net purchaser, adding 134.5 tonnes to its official gold reserves in 2020 alone. Other large net purchasers of gold during the pandemic year were, India, Russia, United Arab Emirate, Qatar, Colombia and Cambodia, among others. Ghana added nothing to its gold reserves over the period.
[…] Read also: BoG to purchase gold from local market […]