BoG buys 88.4 tonnes of gold valued at $6.87bn into reserves

The Bank of Ghana (BoG) has significantly strengthened the country’s gold reserves and economic stability through its Domestic Gold Purchase Programme (DGPP), initiated in 2021.
To date, the Central Bank has purchased a total of 88.4 tonnes of gold, valued at $6.87 billion.
This strategic initiative has allowed the BoG to build up its gold reserves to 73 tonnes as of June 2024, an increase from 65.4 tonnes at the end of December 2023.

$1.8bn invested in Gold for Oil Initiative
A portion of the gold reserves, amounting to $1.8 billion, has been used as equity in the Government’s ‘Gold for Oil’ initiative. This programme aims to stabilize the Ghanaian Cedi and reduce the reliance on foreign currencies.
The DGPP has enabled the BoG to accumulate substantial foreign exchange buffers, surpassing expectations set under the International Monetary Fund (IMF) programme.
BoG Governor Dr. Ernest Addison highlighted the significance of these developments during the official commissioning of the Royal Ghana Gold Refinery, a state-of-the-art facility designed to refine gold locally.
He stated that the programme, along with other donor disbursements, positioned BoG favorably to support the country’s external payment obligations as they arise.

A game-changer for local gold industry
The newly commissioned Royal Ghana Gold Refinery is poised to revolutionize the country’s gold industry by refining gold domestically instead of exporting it in its raw form.
Equipped with cutting-edge technology, the refinery will produce high-purity gold bars ready for international markets.
This facility is expected to significantly increase the value of Ghana’s gold exports, contributing to the country’s economic growth.
In the first half of 2024, Ghana’s small-scale mining sector alone produced 821.97 troy ounces of gold, more than double the volumes of previous years.
This surge in production generated $1.7 billion, accounting for approximately 36% of the country’s total gold export revenue of $5 billion in the first six months.

Economic benefits and future prospects
Dr. Addison emphasized that the refinery marks a new era for gold beneficiation and value addition in Ghana.
By adding value to the country’s gold resources, the refinery has the potential to increase foreign exchange earnings, improve the balance of payments, and provide buffers against external economic vulnerabilities.
The presence of the refinery is also expected to reduce gold smuggling by providing a ready market for artisanal and small-scale miners, promoting transparency and accountability in gold trading.
In the long term, once the refinery achieves London Bullion Market Association (LBMA) Good Delivery List accreditation, Ghana will benefit from reduced dependence on foreign refineries. This will enable the Central Bank to diversify its foreign exchange reserves and accumulate more refined gold, reducing reliance on external borrowing.
Dr. Addison also noted that the refinery would facilitate the production of gold coins and other artifacts, broadening investment options in financial markets and contributing to financial stability.
This initiative aligns with the BoG’s objective to build adequate foreign reserves, stabilize the economy during adverse shocks, and achieve its core mandate of price stability.

BoG’s strategic shift towards gold reserves
The history of monetary management in Ghana reveals that, although gold was not initially prioritized in the reserve cover mix, the economic managers of the 1960-61 financial year made a bold decision to increase the amount of gold held in the Cedi’s cover asset mix.
As a result of this decision, a small quantity of refined gold, valued at approximately $3.7 million at the time, was purchased overseas and stored in the Bank’s vault.

Shift in policy during the 1960s
However, the decline in gold’s value during the 1960s led to a policy shift away from gold as a cover asset, favoring foreign currency and securities instead.
Over the years, the Bank of Ghana’s foreign reserves have grown steadily, reaching nearly $11 billion today.
Despite this growth, 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) standing at 6.14%.

Domestic Gold Purchase Programme
To address this, BoG launched a domestic gold purchase programme that allows it to buy gold from selected local aggregators and mining firms, paying in local currency at the prevailing market price.
Under this programme, dore gold (unrefined gold) purchased from a Gold Aggregator is assayed by the Precious Minerals Marketing Company (PMMC), the national assayer.
Upon satisfactory assaying, the PMMC submits an assay report to the BoG on the day of delivery.
The value of the gold supplied is then determined using agreed pricing sources and the cedi/dollar exchange rate, and payment is made to the aggregator within 48 hours.

Processing and storage of gold reserves
The BoG aggregates the assayed dore gold at its vaults and periodically sends the validated dore gold to an LBMA-certified refinery to be processed to the required international standard of good delivery gold (with a fineness of 99.99%).
The LBMA-certified gold is then stored at designated locations as part of the BoG’s reserves.

Benefits of the gold reserve strategy
Beyond the diversification benefits for the reserves portfolio, the domestic gold purchase programme has enabled the BoG to grow its foreign exchange reserves, thereby fostering confidence, enhancing currency stability, and creating a more attractive environment for foreign direct investments and economic growth. This programme also allows the BoG to leverage its gold holdings to secure cheaper sources of financing, providing short-term foreign exchange liquidity.

Call to action
The Central Bank Governor called on all stakeholders to support this bold initiative, work together to promote the growth of the gold industry, and add value to Ghana’s natural resources, thereby building a prosperous future for the nation.