The year 2020 was a boom period for gold as price of the commodity surged while oil prices were on the downside, but the reverse is playing out this year.
Gold and oil are among the most important export commodities of Ghana. For they bring in a lot of revenue for the country. Ghana’s crude oil revenue as of 2019 was $947.67 million according to the semi-annual report on the petroleum holding fund. And the total value of gold ore export revenue as of 2019 was $6.23 billion.
Ghana, in 2019, became the largest producer of gold in sub-Saharan Africa outpacing South Africa to attain this feat. According to the 2019 report of the Ghana Chamber of Mines, gold production expanded by 6 percent from 2.808 million Ounces in 2018 to 2.989 million ounces in 2019.
In a recent Oxford Business Group (OBG) report, gold production was the main driver of the growth of the mining sector in this COVID-19 season. Compared to other export commodities, it was not significantly impacted by the pandemic. During the period, gold prices were rising rapidly.
However, with falling gold prices on the world market, export revenue from gold is likely to tumble. And thus, slow the pace of the commodity’s performance this year.
On the other hand, oil prices extremely struggled as a result of demand and supply factors. On the demand side, containment measures, lockdowns, border closures and other economic disruptions associated with the outbreak led to a slowdown in production. This was due to difficulties with mobility worldwide. Therefore, the excess supply of oil did not match the dip in demand hence the fall in oil prices.
But for this year, oil prices are shooting up again and this indicates a good omen for Ghana’s oil revenue.
Not all that glitters is gold, ‘oil glitters too’
After rising for almost a year, gold prices have begun experiencing a slump. International gold price as at October 2020 was $1900.4 reflecting a year-on-year change of 28.3%.
However, gold price is currently below $1800 per ounce. And may not reach these high levels in a long time, as was the case in 2020. What is accounting for this decline in gold prices?
The recovery in global economic sentiments due to the rollout of vaccines may account for the decline in gold prices. This trend has significantly impacted the safe-haven status of gold.
During the outbreak of the pandemic, investors diverted their funds from highly volatile assets into gold. Gold commodity is classified as less volatile and able to hedge against the pandemic’s impact. Currently, the investment demand for gold has also declined.
Furthermore, investors now find alternatively better and much riskier assets from which they could rake in large returns. And this is partly influenced by the rebound in economic growth and a subsequent rebound in those alternative investments.
This notwithstanding, lower gold prices provide a great opportunity for those interested in the purchase of physical gold, which saw lower demand due to higher prices.
Falling gold prices is also a good bargain for individuals who are preparing for their weddings, as they could get gold products at far less prices than previously.
A turn to Oil Price Recovery
Oil prices, on the other hand, are on the ascendancy partly due to the fact that the rollout of the vaccines has begun opening up economies- restrictions and border closures have begun easing up.
With the barriers that decreased prices of oil out of the way, oil prices are likely to continue this trajectory in the coming months. OPEC’s daily market price for oil as of 8th March 2021 stood at $68.17 per barrel, up from 2020 average of $50.2 per barrel.
These changes in the two export commodities will affect overall export revenues. Thus, the authorities must be forward-looking in their decisions, going forward.
