(Kitco News) - The Bank of Ghana is jumping into the gold market as it looks to shore up its foreign reserves.
Last week the African nation announced that it would launch a domestic gold-buying program in September. The central bank said it would pay market prices for the precious metal but make the payments in cedis.
Ghana's Vice President Dr. Mahamudu Bawumia said in a social media post that the new program represents a significant and sustainable addition to Ghana's foreign exchange reserves and will strengthen the country's balance of payments.
The new program has been in development for more than a year. In a presentation in June 2021, Ernest Addison, governor of the Bank of Ghana, said that the plan will allow the nation to double its gold reserves in the next five years.
Along with building its foreign reserves, the Bank of Ghana said the program would also support the nation's gold mining industry.
"Ghana's domestic purchasing programme for gold has the potential to improve the small-scale gold mining sector by guaranteeing, that they receive a fair purchasing price for their gold, provide an incentive to formalize and move away from damaging environmental and social practices. It would also lead to a route to formalize and improve ability to sell into formal gold markets and thereby reduce their vulnerability to illegal actors in the domestic and international gold supply chains.
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Ghana is Africa's top gold producer and the world's sixth largest. Last year, the nation produced more than 117 tonnes of gold.
Ghana is the latest central bank to announce plans to increase its gold reserves. Earlier this year, a survey from the World Gold Council showed that of 57 central banks, a quarter planned to add more gold to their foreign reserves. Most of the demand is coming from emerging market central banks.
Many economists and market analysts see central banks' growing appetite for gold as part of the growing de-dollarization trend. Nations are trying to lower their exposure to the U.S. dollar.
