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Wealth for all or just the elite: Is Ghana’s gold coin a hedge against inflation or an exclusive investment?

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The Bank of Ghana’s decision to introduce a gold coin has sparked conversations across the nation. Seen by some as a smart move to protect against inflation, others view it as a tool that might benefit only the
wealthy. The question remains: Will this new gold coin empower all Ghanaians, or is it just an exclusive investment for the elite?

On September 27, 2024, the Bank of Ghana launched the Ghana Gold Coin (GGC), marking a significant
milestone in the nation’s financial landscape. During the launch, Dr. Ernest Addison, Governor of the Bank of Ghana, described the GGC as a proactive measure to deepen financial markets and provide Ghanaians
with new investment opportunities. However, we must consider whether the GGC will truly empower
everyday Ghanaians or remain an investment vehicle primarily for the affluent.

Gold as an Inflation Hedge:

Gold has historically served as a reliable store of value, particularly during periods of economic uncertainty
and currency depreciation. Dr. Addison stated that the GGC “enables savers resident in Ghana an
additional avenue to invest and reap the benefits from the Bank of Ghana’s domestic gold purchase
program.” Given that inflation rates have exceeded 30% in recent years, Ghanaians are keenly searching for assets that can preserve their wealth.

The GGC stands out as a potential solution, given gold’s long￾standing reputation as a hedge against inflation.

For the GGC to function effectively as an inflation hedge, however, it is imperative that access to this asset is widespread.

The initiative should not cater solely to high-net-worth individuals but instead be designed
to include all segments of the population. Historical evidence from countries like South Africa, where gold coins like the Krugerrand were introduced, suggests that making gold accessible to a wider population can contribute to long-term wealth preservation for all citizens.

However, in countries where access was limited to the elite, gold’s potential to act as a hedge was less impactful for everyday savers.

Target Audience: Who Will Benefit?

The GGC will be available in three denominations—1 oz, 1/2 oz, and 1/4 oz—offering flexibility for various
investor profiles. However, concerns arise regarding its accessibility. The coin’s price will be linked to the
previous day’s London Bullion Marketing Association (LBMA) auction PM price, with daily updates published by the Bank of Ghana.

This pricing mechanism could potentially restrict access for lower- to middle-income investors.
While Dr. Addison emphasized that the GGC “democratizes access to this enduring financial asset,” it remains to be seen whether the average Ghanaian can afford to purchase gold at these rates. Historically,
gold investments have been costly, and unless there are mechanisms to enable smaller investors to participate—such as shared ownership or savings plans tailored to gold—the GGC may end up being more
exclusive than inclusive. For instance, countries like India have implemented “gold savings schemes” to
allow lower-income individuals to invest in gold incrementally, which could be an avenue for the Bank of Ghana to explore.

The Path Forward: A Wealth-Building Opportunity for All

The GGC offers Ghanaians an opportunity to diversify beyond traditional savings and fixed-income products. However, investors should approach gold with caution. While it remains resilient, gold is not immune to price fluctuations.

Those considering the GGC must be aware of market conditions at the time
of purchase. If global gold prices decline, GGC holders could face capital losses, especially if they
anticipated short-term gains.

A long-term perspective is essential in line with the enduring value that gold
has historically provided.
To ensure that the GGC does not disproportionately favor the wealthy, a multi-faceted approach is
necessary. Increasing financial literacy, providing scalable investment options, and promoting the benefits of gold ownership are crucial steps. The Bank of Ghana could take inspiration from countries where government-backed gold initiatives have focused on inclusivity, ensuring a broad base of citizens can participate in wealth-building.

Collaborating with fintech platforms to offer digital gold investments or
introducing savings plans linked to the GGC could also make gold more accessible to everyday Ghanaians.

Conclusion

The launch of the GGC represents a pivotal opportunity for wealth preservation in Ghana. However, it is crucial to ensure that this initiative does not disproportionately benefit the wealthy while leaving the average Ghanaian behind.

By prioritizing accessibility and affordability, the Bank of Ghana can transform
the GGC into a cornerstone of wealth creation for all Ghanaians. Developing partnerships with fintech
platforms, enhancing distribution mechanisms, and offering fractional ownership or gold savings plans could ensure that the GGC truly lives up to its potential as a hedge against inflation for everyone.

Only time will tell if this initiative democratizes wealth or if it becomes yet another exclusive tool for the
elite. As the rollout progresses, policymakers and financial institutions must remain vigilant in fostering
inclusion, ensuring that Ghana’s Gold Coin is more than just a symbol of wealth but a genuine opportunity
for financial empowerment.

By Kelvin Ampofo

References

  1. Bank of Ghana launches Gold Coin to provide investment opportunities for … Ghana News Agency
  2. BoG launches gold coins to enhance stability of Cedi – cuts policy rate by 200 basis points – Ghanaian
    Times
  3. The gold coin gives savers resident in Ghana an additional avenue to invest – 3news

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