
The Monetary Policy Committee (MPC) announced the Bank of Ghana’s (BoG) gold coin investment initiative on September 27, 2024.
The introduction presents investors, particularly Ghanaians, with an opportunity, but there are unknown or unclear aspects that prospective investors should fully comprehend before making a commitment.
While the drive has created some excitement among Ghanaians, numerous investors know nothing about specific basic parts of this investment initiative.
In uncertain economic conditions like the Ghanaian business climate, gold coins are an appealing investment option.
However, beyond the surface, investors ought to realize that there are key areas that are not known to them. Investor need to have a clear understanding of what they are going for prior to owning the gold coin from the Bank of Ghana (BoG).
These should be known by investors:
• Market Value and Pricing Transparency: How is the price of the gold coin going to be set, and how often will it be updated? Is the price going to be tied directly to global gold prices, or does it going to consider additional premiums?
It is essential for investors to know whether the coin’s value is determined by the international gold market or by a fixed pricing system established by the BoG. Additionally, it is essential for investors to comprehend how frequently the value changes in response to changes in the market.
• Liquidity and Buyback Guarantee: Can gold coins be easily liquidated or resold by investors? Is there a buyback program from the BoG or other ensured purchasers?
Liquidity options should be made clear to investors, including whether and how they can resell the coins to the BoG or other authorized dealers. When evaluating risk, it is essential to know how simple it is to return the investment to cash.
• Are There Implications for Taxes? What are the financial commitments for gold coin investors in Ghana? When buying or selling the coins, are there any fees like VAT, capital gains taxes, or others?
Investors need a reasonable understanding of any duty liabilities, both on the acquisition of the gold coins and on any increases from exchanging them, to see the value in the investment’s costs completely.
• Security and storage: How are the gold coins going to be stored?. Who is in charge of ensuring their safety? Does the BoG provide custodial services, or does the investor provide storage?
The responsibility and expense of physically storing gold can be significant. For the purpose of evaluating the overall risk, it is crucial to determine whether investors will have access to safe and insured storage options or will have to arrange it on their own.
• Regulatory Oversight and Investor Protections: What administrative insurances exist for investors? Is the gold coin drive controlled under Ghana’s protections regulations, and what plan of action do investors have in case of debates?.
Investors should be aware of how this initiative fits into Ghana’s legal framework and what safeguards are in place to protect their interests. Understanding regulatory oversight can help mitigate legal risks.
• Currency Risk: How does the Ghanaian cedi’s exchange rate affect the value of the gold coin for local and international investors? Will there be price fluctuations due to changes in the currency value?.
For local investors, especially, understanding how currency depreciation or appreciation impacts the gold coin’s purchasing power or resale value is critical for evaluating investment returns.
• Duration and Maturity: Is there a maturity period attached to the investment, or is it a purely speculative asset with no time horizon?
If there are long-term investment expectations or restrictions on when investors can sell, this will influence their ability to make short-term or long-term plans around the coin.
• Demand and Market Size: How much market demand exists for these coins, and who are the potential buyers (beyond the BoG)?
The potential for price appreciation relies on demand. Investors should know whether these coins will primarily appeal to local investors, institutional players, or have international appeal.
• Purpose of the Initiative:
Is the primary objective of this initiative to create a store of value, boost national gold reserves, or offer a speculative investment opportunity?
Understanding the underlying motivation behind the initiative (whether it’s purely investment-focused or part of a broader economic policy) can help investors assess the long-term sustainability of the program.
• Associated Fees and Costs: What are the hidden costs or fees associated with buying, holding, and selling the gold coins (e.g., commissions, storage fees, or transactional costs)?
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Investors should be aware of any additional costs that might reduce their overall returns, such as broker fees or custody charges.
• Impact of Geopolitical and Economic Conditions: How could changes in global gold markets, Ghana’s economic stability, or geopolitical factors affect the value of the coin investment?
The more extensive monetary and world of politics can essentially affect gold costs. Ghana’s economic outlook or fluctuations in international gold prices should be understood by investors.
A clear communication strategy will help first-time investors who are unfamiliar with the complexities of gold markets make better decisions.
By looking for clearness on these obscure components, investors can settle on additional educated conclusions about whether the Bank regarding Ghana’s gold coin investment lines up with their monetary objectives and risk hunger.
Meanwhile, this is how to buy the Ghana Gold Coin:
Interested buyers can purchase the GGC through commercial banks. To buy a coin, individuals must place an order at their bank, specifying the desired weight and quantity.
Payments must be made through bank or mobile money accounts, as cash payments will not be accepted. Banks will facilitate transactions by opening gold accounts on behalf of their customers.
Credit: Enock Akuffu, Business and Financial Times