Gold Prices Breaking Bounds & BoG’s Reserves Keep Soaring – The Inherent Risks Ghana Must Address

Gold prices on the international market in recent days are breaking barriers, hitting record highs. The price of the shiny and precious metal is currently hovering around $4000 per ounce, putting smiles on gold producers and gold investors.

At the same it is a double blessing for Ghana. While the prices on the international market keeping soaring, the country’s gold reserves held by the Bank of Ghana also keep hitting records. Latest data reveal that the BoG’s reserves have hit 37tonnes thanks largely to the Domestic Gold Purchase Programme.

On the surface, these stories are glittering as gold itself. It is a no-brainer that strong reserves improve balance sheet resilience and shield the cedi. In addition, with the rising prices, Ghana is assured of significant gold revenue inflows, which can limit borrowing and put public debt under control.  

But beneath the situation is a very important reality that the government must take a closer look. Gold’s shiny and glittering beauty can also mask very critical risk factors that require attention.

The Volatility Trap

Gold is always considered a “safe haven” investment. But when you flip the coin, it is also highly volatile. Prices are rising, and everyone is happy. However, price depends on global interest rates, inflation expectations, geopolitics, and investor sentiment. All of these can shift the price pendulum abruptly.

Today’s record high could easily give way to a sharp fall if, for instance, the U.S. Federal Reserve starts cutting rates or if global investors move back to riskier assets.

For Ghana, that means a sudden drop in gold prices could instantly erode the paper value of its reserves, making the country’s external position appear weaker overnight. It can also throw revenue projections in disarray.

Associate Professor of Finance at Andrews University in the United States, Prof. Williams Peprah, commenting on the development, indicated that, “We are exposed to price volatility. We are happy it’s going to $4,000. But anything can happen. It may drop.”

Liquidity Limitations

Gold is valuable, but it’s not cash. You can’t spend gold at the market. In times of fiscal pressure or external payment crises, converting gold into foreign currency can take time and comes with costs.

Although keeping gold reserves strengthens Ghana’s balance sheet, it is less liquid than U.S. dollars. If the country urgently needs to pay for imports or service debt, selling large quantities of gold may not be as seamless as drawing on dollar reserves.

 “In terms of liquidity, we say it is less liquid. To be able to convert it into cash, you may need to go through some processes,” the Professor of Finance noted.

Storage, Security, and Management Risks

One risk factor that the country may want to pay attention to is that as Ghana’s gold reserves grow, so do the logistical and security burdens.

Holding physical gold requires secure storage, insurance, and regular audits. These, experts say, all of which cost money and invite operational risks.

The higher the reserves climb, the greater the exposure to mismanagement, or even accounting opacity if not backed by strong governance and transparency mechanisms.

This means Ghana must therefore pair its gold accumulation strategy with robust institutional oversight to avoid turning its national treasure into a vulnerability.

Overreliance Danger

Another concern amid the rising reserves is overconcentration. With gold reserves rising sharply, Ghana risks becoming too reliant on a single asset class.

Although the diversification into gold was a strategic move to hedge against dollar volatility, relying too heavily on it can create another reverse risk. This makes the country vulnerable to a global gold price slump.

Diversification, analysts argue, should not mean replacing one form of dependence (on foreign currency) with another (on gold). Instead, Ghana needs a balanced reserve portfolio blending gold, foreign exchange, and other financial assets.

Prof. Peprah further admonishes that, “it’s good for diversification, but putting too much of your reserves in gold is also something that we must critically look at. At least we should have a balance between cash, which is our balance of payment. We must look at it very well and make sure that we have money, real cash, to be able to pay.”

A Good Opportunity But Double-Edged

It is undeniable that the BoG’s gold strategy has brought a sense of pride and protection to Ghana’s financial stability. It signals confidence, self-reliance, and a shift away from dollar dependency.

However, as the saying goes, “Not all that glitters is gold.” The current price rally and growing reserves are both a blessing and a warning. Ghana must remain vigilant, managing its newfound wealth with the same prudence it used in acquiring it.

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