Governor of the Bank of Ghana, Dr Ernest Addison, has said that during the era of the Gold Standard, currency issued by Central Banks has to be fully backed by gold, measured in troy ounces at the time.
This Gold standard measure of assessing the strength of currencies, he said, was later abandoned at the turn of the 20th Century, when economies begun printing currencies without the backing of gold.
Since this transition, Dr Addison added, currencies have been backed by a variety of instruments including gold, government bills and stocks, and first-class bills of exchange.
“In fact, when Ghana issued its jurisdictional currency in 1958, the original currency cover assets for the currency issued included gold, sterling, and call money in the United Kingdom, and British Treasury Bills with maturities not exceeding three months, among others.
“The history of monetary management has revealed that while Gold in the reserve cover mix was not given much weight, the managers of the economy, during the 1960-61 financial year took a bold decision to increase the amount of gold to be held in the cover asset mix for the Cedi.
“As a result of this decision, a small amount of refined gold, valued at around US$3.7 million at that time was bought overseas and transported to the Bank’s vault. The fall in the value of Gold in the 1960s saw a shift in policy away from Gold as a cover asset to foreign currency and securities,” he said he said during the launch of the God Purchase programme in June this year.
He added “The Bank of Ghana ‘s foreign reserves has grown steadily over the last fifteen (15) years to current levels of almost US$11.00 billion, but the portion of gold reserves has remained unchanged at 8.77 tonnes, with the average value of gold reserves held as a percentage of Gross International Reserves (GIR) at 6.14 percent.
“A cross country comparison shows that contrary to Ghana’s static gold holdings in its reserves, the USA and other industrialized countries in the Eurozone have continued to hold large gold reserves, post the gold standard era. According to the International Monetary Fund (IMF) and the World Gold Council, major industrialized countries held the largest volume of gold reserves as at April 2021, followed by major emerging markets with major developing countries lagging behind the curve.
“Globally, Central Banks demand for Gold, over the past decade, ranks third behind Jewellery, Technology and Investment sectors.
“These trends are revealing because Ghana has mined gold for over three centuries and for the most part, the gold is exported. In 2019 for instance, Ghana was adjudged the largest producer of gold in Africa and the 7th largest in the world. Yet, in that same year, other central banks acquired a record level of 670 tonnes of gold to boost their reserves according to the World Gold Council.”
By Laud Nartey|3news.com|Ghana