Between January 3 and April 3, this year, prices of the precious metal surged by about 4.2 per cent to U$1,613.1 per ounce, according to data from the World Gold Council.

At U$1,613.1 per ounce as of April 3, gold prices were now in their seven-year high, with experts predicting that the price surge could remain for as long as the COVID-19 pandemic continues to dampen investors’ appetite in financial instruments.

Here in Ghana, miners under the umbrella of the Ghana Chamber of Mines, are excited about the gold price increment but fear that supply chain constraints resulting from measures to contain the COVID-19 would dampen production, leading to decreased benefits from the bullish prices.

So far, no mine has reported significant disruptions to operations due to the pandemic although one mine has recorded a case at site.

An Economist and Research Fellow with the Institute for Fiscal Studies (IFS), Mr Leslie Dwight Mensah, told the GRAPHIC BUSINESS that “gold should continue to do well for as long as demand remains strong.”

He explained that the current low interest rates in the world in response to the viral spread had successfully shifted investors’ appetite from financial investment instruments to gold and gold-backed instruments.

In mid-March this year, England’s central bank reduced its benchmark rate to 0.1 per cent, the lowest in its 325-year history. Its counterpart in the United States of America (USA), the Federal Reserve Bank (FED) also cut its rate to near-zero, all in response to the COVID-19 crisis.

“I do not see any condition that says that we should expect gold supply to increase.

“Either the demand moderates or supply increases for prices to go down but at the moment, there is incentive for demand to go up,” Mr Mensah said.

He noted that until the COVID-19 pandemic had ended, gold prices would continue to rise as the metal enjoyed its status as the safest investment instrument in times of crises.

Importance to economy

Gold’s bullish run comes at a time when crude oil prices have crashed by more than 50 per cent on supply gluts and cocoa prices tumbled by almost five per cent on the back of the virus.

At a time when foreign exchange and general government revenue were projected to fall, gold’s glitters provide some glimpses of hope.

Beyond being a source of employment to millions across the country, gold is Ghana’s top export commodity, accounting for more than 40 per cent of total export receipts.

Last year, its export earnings totalled GH¢15.63 billion, according to Bank of Ghana data.

Mines in Ghana

Mr Sulemanu Koney, who speaks for mining companies in the country, told the GRAPHIC BUSINESS on April 5 that his outfit saw the rise in gold price to be exciting for the industry and a positive development that could lighten up some hope in an economy ravaged by the viral spread.

He said so far, no company in the country had stopped production owing to the COVID-19 pandemic, which has since April 5 claimed five lives and infected 214 people.

He said shipment of gold and related cargos out of and into the country were continuing in the midst of the restrictions that the COVID-19 had placed on economic activities.

“Mining’s contribution to the economy is enormous; we all know it.

“Now, the price is quite firm and so you do not want to undermine production,” he said, noting that it was “a plus” that mining operations were exempted from the ongoing lockdown of the Greater Accra Region and parts of the Central Region and the Ashanti Region, where some mines operate in. 

Implications

Mr Koney, who is the Chief Executive Officer of the Ghana Chamber of Mines, said the continuous production would help retain jobs in the mining sector at a time when companies in the tourism and hospitality business were laying off staff and firms and other sectors were rationing workers due to limited activities.

Continuous mining also means continuous revenue generation in the form of taxes, royalties and incomes to adjoining businesses.

The mining sector accrued GH¢2.36 billion, equivalent to 14 per cent of domestic revenue collections by the Ghana Revenue Authority (GRA) in 2018, according to data from the chamber.