Overview
Ghana has faced various economic challenges over the years, leading to reliance on external financial support from organizations like the World Bank and IMF. These challenges led to the introduction of the Domestic Debt Exchange Programme (DDEP), which resulted in cedi depreciation, high inflation, and loss of investor confidence in the bond market.
In response, the Bank of Ghana introduced the Ghana Gold Coin (GGC) with two main objectives:
- To mop up excess liquidity to reduce stress on the dollar and curb inflation.
- To offer another investment instrument in the financial market.
Gold is globally recognized as a resilient hedge during economic turbulence. The GGC provides residents access to this asset, enabling portfolio diversification. It also supplements existing open market operations by helping the BoG manage excess cedi liquidity.
This study examines the performance of the GGC since its launch on September 27, 2024, and trading commencement in November 2024. It explores price volatility, market reactions, and hedging potential against USD fluctuations to assess its impact on Ghana’s financial markets.
Methodology
The study employs trend analysis to evaluate the GGC’s performance based on data from the London Bullion Market Association (LBMA) PM gold prices and Bloomberg USD/GHS exchange rates. Holding Period Return (HPR) was used to measure returns due to the short time horizon (<1 year).
Data and Summary Statistics
Daily data was collected from:
- LBMA Auction PM Price – for global gold prices.
- Bloomberg REGN Mid-Rate – for USD/GHS exchange rate.
The period under review spans from November 25, 2024, to May 30, 2025 (6 months).
Key Observations
- USD/GHS Rate: Fell from ~15.8 to ~10.30 (cedi strengthened).
- LBMA PM Gold Price: Rose from $2,694.95 to $3,312.40 per ounce.
- GGC Price (1 oz): Dropped from GH¢46,155 to GH¢35,696.75 with volatility in between.
There was no one-to-one correlation between USD/GHS and LBMA gold prices. For example:
- In early May 2025, LBMA prices were near their peak while USD/GHS hit its lowest point.
- Thus, gold prices and the cedi moved somewhat inversely.
Figure 1: Historical Trend of GGC Price vs LBMA and USD/GHS
| Series | Description |
|---|---|
| Bloomberg USD/GHS | Blue Line – Exchange Rate |
| GGC 1 oz | Orange Line – Local Price in GH¢ |
| LBMA PM Gold | Grey Line – Global Price in USD |
Correlation Table
| Pairwise Comparison | Expected Sign | Actual Correlation |
|---|---|---|
| LBMA vs GH₵ Gold Coin Price | Positive | Very High (+) |
| USD/GHS vs GH₵ Gold Coin Price | Positive | Moderate (+) |
| USD/GHS vs LBMA Gold Price | Insignificant | Low/Negligible |
Performance Analysis
Over the six-month period:
- Global gold prices rose by 22.91%.
- Local GGC prices fell by ~19.61% due to cedi appreciation.
- Volatility of local prices was higher than international prices (Standard Deviation: 0.907% vs 0.783%).
- Maximum drawdown for local investors was -34.87% compared to -3.66% internationally.
Table 1: Historical Month-on-Month Closing Prices
| Period | ₵1.00 oz | ₵0.50 oz | ₵0.25 oz | USD/GHS | LBMA ($) | HPR% |
|---|---|---|---|---|---|---|
| 29-Nov-24 | 44,403.68 | 22,607.09 | 11,740.88 | 15.80 | 2,694.95 | - |
| 31-Dec-24 | 40,169.31 | 20,486.68 | 10,675.23 | 14.70 | 2,609.10 | -9.54% |
| 31-Jan-25 | 44,507.86 | 22,665.10 | 11,774.80 | 15.30 | 2,787.25 | +9.67% |
| 28-Feb-25 | 46,526.69 | 23,677.54 | 12,284.44 | 15.50 | 2,880.80 | +4.53% |
| 28-Mar-25 | 49,250.81 | 25,039.60 | 12,965.47 | 15.50 | 3,056.55 | +5.85% |
| 30-Apr-25 | 48,900.28 | 24,845.44 | 12,847.00 | 14.25 | 3,305.05 | -0.71% |
| 30-May-25 | 35,696.75 | 18,183.97 | 9,448.66 | 10.30 | 3,312.40 | -27.01% |
Table 2: Inception to Closing Prices (Nov 25, 2024 - May 30, 2025)
| Period | ₵1.00 oz | ₵0.50 oz | ₵0.25 oz | USD/GHS | LBMA ($) | HPR% |
|---|---|---|---|---|---|---|
| 25-Nov-24 | 44,403.68 | 22,607.09 | 11,740.88 | 15.80 | 2,694.95 | - |
| 23-Apr-25 | 54,806.36 | 27,816.13 | 14,352.32 | 15.42 | 3,433.55 | +23.45% |
| 30-May-25 | 35,696.75 | 18,183.97 | 9,448.66 | 10.30 | 3,312.40 | -34.87% |
Discovered Hindrances
The pricing mechanism of the GGC, based on LBMA prices converted via USD/GHS exchange rate, exposes it to foreign exchange risk. This means that even if global gold prices rise, a strengthening cedi can cause local coin prices to fall.
Example: On May 26–27, 2025, LBMA prices remained constant due to UK holiday, but GGC prices dropped because of cedi appreciation.
This inverse relationship creates a latent risk where investors purchasing during cedi weakness face mark-to-market losses if the cedi strengthens.
Potential Solution
The Bank of Ghana should consider adopting a valuation model that uses the growth rate of LBMA gold prices rather than relying solely on exchange rate conversion. This would align local pricing more accurately with global trends and reduce currency-driven volatility.
Table 3: Simulated GGC Pricing Using LBMA Growth Rate
| Period | ₵1.00 oz (Simulated) | ₵1.00 oz (Actual) | USD/GHS | LBMA ($) | Deviation |
|---|---|---|---|---|---|
| 25-Nov-24 | 44,403.68 | 44,403.68 | 15.80 | 2,641.85 | 0 |
| 31-Dec-24 | 42,989.16 | 40,169.31 | 14.70 | 2,609.10 | +2,819.85 |
| 31-Jan-25 | 45,924.47 | 44,507.86 | 15.30 | 2,787.25 | +1,416.61 |
| 28-Feb-25 | 47,465.86 | 46,526.69 | 15.50 | 2,880.80 | +939.17 |
| 28-Mar-25 | 50,361.63 | 49,250.81 | 15.50 | 3,056.55 | +1,110.82 |
| 30-Apr-25 | 54,456.07 | 48,900.28 | 14.25 | 3,305.05 | +5,555.79 |
| 30-May-25 | 54,577.17 | 35,696.75 | 10.30 | 3,312.40 | +18,880.42 |
Using this method would:
- Protect against FX-induced distortions.
- Show consistent returns.
- Boost investor confidence.
Conclusion
The Ghana Gold Coin (GGC) was introduced to provide a hedge against inflation and promote financial resilience. However, its pricing mechanism poses risks due to exchange rate sensitivity.
Key Takeaways:
- GGC prices are highly sensitive to USD/GHS movements.
- A stronger cedi undermines local gold value despite rising global prices.
- The coin has not yet reached broad investor segments due to high entry cost and low investor sentiment post-DDEP.
- Introducing GGC-backed mutual funds could improve accessibility and promote broader participation.
In summary, while the GGC represents a valuable addition to Ghana’s financial instruments, structural improvements in pricing and accessibility are necessary to maximize its potential as both a store of value and a catalyst for inclusive investment.