Striking gold or sinking fast?: A deep dive into gold coin and cedi strength

The introduction of the Domestic Debt Exchange Programme (DDEP) has shaken investor confidence in the bond market. As a result, this market has remained unattractive for years. The financial markets in Ghana have shown mixed responses as investors navigate uncertainty.

To address these challenges, the Bank of Ghana launched the Ghana Gold Coin (GGC). This initiative aims to achieve two main goals: first, to absorb excess liquidity and reduce dollar stress; second, to provide another investment option in the market.

Gold has proven to be a resilient financial asset globally. It serves as a natural hedge during economic turbulence. The GGC allows residents access to this enduring asset, helping them diversify their portfolios.

The issuance of GGC aims to help the Bank of Ghana manage excess cedi liquidity in banks. This complements existing tools like Bank of Ghana bills and overnight deposits used for open market operations.

This study explores how the GGC impacts Ghana's financial markets since its launch on September 27, 2024. It examines price volatility based on previous day’s London Bullion Market Association (LBMA) afternoon prices using trend analysis.

Trend analysis is commonly used in finance to identify patterns and make predictions about asset prices. This study focuses on analyzing GGC price trends over specific periods for potential investment strategies.

It also evaluates GGC performance against the USD as a hedging method to strengthen the cedi.

Methodology

We use trend analysis to assess GGC performance since its inception on November 25, 2024. We compare it with dollar performance regarding USD/GHS rates and global gold prices.

To measure coin performance accurately, we harmonize data from various sources and units. We compute normal returns using the Holding Period Return model due to our data's short time horizon.

Data and Summary Statistics

We collect daily data from two main markets: gold prices from LBMA auction PM prices and forex rates from Bloomberg REGN Mid-Rate USD/GHS exchange rate. Our closing date is May 30, 2025, marking six months since trading began.

Figure 1 shows historical daily closing prices of GGC in cedis compared with its dollar price via Bloomberg rates. From this figure, we see that USD/GHS decreased from approximately 15.8 in late November 2024 to 10.30 by May 30, 2025.

The LBMA PM gold price rose from $2,694.95 to $3,312.40 per ounce during this period. The price of the Ghanaian one-ounce coin fluctuated significantly; it dropped from GH¢46,155 on November 25 to GH¢42,390 by December 2 before peaking at around GH¢54,806 by April 23 and easing back down to GH¢35,696 by May 30.

Generally, higher LBMA gold prices push up local coin prices while a stronger cedi pulls them down. There was no simple correlation between USD/GHS and LBMA during this time frame.

For example, early May saw high LBMA gold prices while USD/GHS was low (indicating a strong cedi). Thus when LBMA rose it increased local coin prices but when USD/GHS fell it offset some gains.

The coin experienced significant volatility throughout this period; notably an approximate drop of about eight percent within one week at late November/early December when LBMA was flat but cedi strengthened instead.

From January through April 2025, coin pricing trended upward alongside global gold values on LBMA until peaking above $3k on April 23 before declining again as cedi strengthened rapidly despite stable LBMA values near their highs.

Overall volatility reflects both rising global gold prices and shifts in cedi value—when international gold rises alongside a strong dollar local coins increase too while strengthening cedis can pull local pricing downwards.

However if global gold rises faster than cedi appreciates then local coins may still rise accordingly reflecting true value despite currency fluctuations.

Between November 2024 and May 2025: The Ghanaian cedi strengthened against dollars (USD/GHS decreased), global gold rose steadily while GGC exhibited mixed patterns tracking these forces closely.

The chart illustrates these opposing movements: steady climbs for LBMA gold versus gradual falls for USD/GHS along with fluctuating responses from Ghanaian coins reflecting changes therein at varying paces relative each other’s growths or declines respectively.

While strengthening cedis were intended benefits behind introducing GGC they inadvertently devalue coins unless offsetting increases occur elsewhere such as international markets driving demand upwards simultaneously enough times together consistently over longer durations overall too!

Figure Analysis

Figure one depicts historical trends showing three series: Bloomberg USD/GHS exchange rate (blue), one-ounce Ghana Gold Coin price (orange), and LBMA PM gold price (grey) across Nov-May timeframe analyzed hereafter further below too!

Table displays relationships between international/local pricing dynamics alongside exchange rate influences confirming strong positive correlations exist between both sets indicating close ties overall trends observed locally following those globally more broadly speaking too!

Positive correlations also noted between exchange rates impacting local pricing dynamics suggesting fluctuations do affect outcomes seen here ultimately leading towards greater insights gained through analyses conducted herein thus far overall!

Pairwise Comparison

| Metric | 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 |

This table summarizes pairwise comparisons among LMBA’s pricing structures versus respective currencies involved throughout analyses conducted herein thus far overall!

Further Insights

Over time since introduction there remains notable structural challenges affecting investor confidence long-term regarding valuations derived primarily through foreign exchanges rather than intrinsic worth alone which could undermine future prospects altogether if not addressed adequately soon enough moving forward henceforth thereafter!

Despite macroeconomic benefits stemming from appreciating currencies easing import costs etc., holders face penalties disincentivizing domestic investments into assets like these unless adjustments made promptly addressing concerns raised previously outlined herein thus far overall!

In conclusion ongoing adjustments needed ensure proper alignment occurs between incentives offered investors alongside broader economic objectives pursued collectively across sectors involved ensuring stability maintained throughout periods ahead moving forward continuously thereafter onwards beyond current situations faced presently today!