Ghana’s decision to expand its gold reserves and introduce a bold gold-price hedging program has sparked intense debate across financial, business, and policy circles.
With gold prices soaring to record highs in recent years, the Bank of Ghana (BoG) is betting that the precious metal can act as a shield against global uncertainty, strengthen the country’s reserves, and help stabilise the cedi.
While the promise is real, banking and financial consultant Dr. Richmond Atuahene says, the risks are just as high.
According to Dr. Atuahene, in a detailed research paper titled “Critical Strategic Issues and Challenges of Central Banks’ Gold Reserves Holding and Hedging Strategies.’- A case of Bank of Ghana,” copied to The High Street Journal, there are a number of pressing issues the bank must address.
Why Gold, Why Now?
The financial analyst confirms that gold has historically been a safe-haven asset. It has been a hedge against inflation, currency swings, and geopolitical shocks. For Ghana, Africa’s leading gold producer, the logic of using domestic production to build reserve buffers seems straightforward.
He notes that since 2021, under the Domestic Gold Purchase Programme (DGPP), the BoG has been buying locally mined gold in cedis. By mid-2025, the bank had acquired about 146 tonnes of gold, sold a portion for foreign exchange, and retained around 36 tonnes in reserves.
The launch of the Ghana Gold Board (popularly known as “GoldBod”) in 2025 further cemented this strategy.
But he says the central bank’s new twist is hedging. This is using financial instruments such as futures, forwards, and options to lock in today’s high gold prices and protect reserves if the market falls tomorrow.
The Upside: A Cushion Against Uncertainty
The potential benefits, he says, are clear. Ghana’s foreign reserves, reported at over US$11 billion with around 4.8 months of import cover, have received a strong boost from the gold purchases. By hedging a portion of these reserves, the BoG hopes to:
- Reduce volatility in gold’s value and ensure predictable returns.
- Strengthen investor confidence in Ghana’s financial stability.
- Shield the cedi by locking in foreign exchange earnings from gold exports.
In short, the policy could give Ghana breathing space to manage external shocks, from swings in oil prices to tighter global financial conditions.
But the Risks Are Just as Real
Dr. Atuahene, however, indicates that gold is not a magic wand. He points to several risks Ghana must manage carefully:
- Price risk: Hedging protects against losses if prices fall but also caps gains if prices continue to rise.
- Operational and technical risk: Hedging is complex, requiring expertise, tight governance, and transparency, a weakness that has tripped Ghana before. The Ashanti Goldfields hedging debacle of the late 1990s remains a cautionary tale.
- Liquidity and cost issues: Ghana must refine much of its locally sourced gold to international LBMA standards, or risk selling at a discount. Storage, transport, and insurance add further costs.
- Reputation and ESG concerns: Illegal small-scale mining (“galamsey”) remains a stain on Ghana’s gold. Without proper traceability, global buyers may restrict imports, hurting both the economy and the credibility of gold-backed reserves.
- Opportunity cost: Gold pays no interest. Concentrating reserves in gold means Ghana forgoes income from other investments.
What Must Be Done: Strong Policy Recommendations
Dr. Atuahene argues that the success or failure of Ghana’s gold hedging programme will depend less on market timing and more on governance, transparency, and responsible sourcing.
Based on his research findings, here are his key recommendations:
A Clear Hedging Policy Framework
The BoG must publish a written hedging strategy. This should limit the portion of reserves hedged (e.g., not more than 30%), cap the tenor of contracts, and require Board or even Parliamentary approval for exceptions. Hedging must remain insurance, not speculation.
Transparency and Reporting
Regular, IFRS-compliant disclosures on hedging activities, counterparties, and mark-to-market exposures are essential to rebuild public trust and assure markets that Ghana is not repeating past mistakes.
Counterparty and Risk Management
All deals should be done with highly rated counterparties, preferably through central clearing houses. Strict collateral rules must be enforced to avoid margin call crises.
Upgrade Local Gold to Global Standards
Ghana must fast-track investments in refining and certification so that domestic bullion meets London Bullion Market Association (LBMA) standards. This avoids costly discounts and ensures reserves remain liquid and internationally tradable.
Crack Down on Galamsey and Strengthen Traceability
Without credible ESG and traceability systems, Ghana risks export bans and reputational damage. The GoldBod must urgently enforce licensing, certification, and digital tracking of all gold sourced under the DGPP.
Build Technical Expertise
Hedging requires skilled treasury staff, robust internal controls, and external oversight. The BoG should set up a specialised derivatives unit, backed by technical assistance from the IMF, World Bank, or other credible partners.
Channel Windfalls Into Diversification
Resource windfalls must not be squandered. Ghana should enshrine clear “cash waterfall” rules to channel surplus gold revenues into a transparent Stabilisation or Sovereign Wealth Fund, investing in agriculture, manufacturing, and human capital.
The Bottomline
For the banking and financial consultant, Ghana’s gold hedging experiment is a bold attempt to harness its mineral wealth for macroeconomic stability. If well-executed, it could provide a safety net for the cedi, improve foreign reserve management, and ease external vulnerabilities.
However, he fears that without tight governance, credible sourcing, and disciplined execution, the risks of costly mistakes are high. As he signals, gold can be a shield, but only if you hold it right. Otherwise, it can weigh down the entire economy.
