Rising gold costs don’t ensure upper output — Senyo Hosi warns – Life Pulse Daily

Introduction: Why Higher Gold Prices Don’t Guarantee More Production

When gold prices climb, many assume that gold production will automatically follow. But economist and financial analyst Senyo Hosi warns that this isn’t always the case—especially in Ghana, Africa’s top gold producer.

In a recent commentary, Hosi explained that while global gold prices reached record highs in 2025, Ghana’s large-scale gold mining output actually declined from about 104 metric tonnes in 2024 to roughly 101 metric tonnes in 2025.

This counterintuitive trend highlights a key economic concept: gold supply inelasticity. In simple terms, even when prices go up, production doesn’t always respond quickly or proportionally.

This article breaks down Hosi’s analysis, explores the structural and regulatory barriers affecting Ghana’s gold sector, and offers practical insights for investors, policymakers, and industry stakeholders.

Key Points

Background: Ghana’s Gold Sector and Recent Trends

Ghana as Africa’s Top Gold Producer

Ghana has consistently ranked as Africa’s largest gold producer, ahead of South Africa and Mali. The country’s gold sector is a cornerstone of its economy, contributing significantly to export earnings and government revenue.

The sector includes both large-scale mining operations and artisanal and small-scale mining (ASM), the latter of which employs hundreds of thousands of people, especially in rural areas.

Gold Price Trends in 2025

Global gold prices surged in 2025, driven by factors such as inflation concerns, geopolitical tensions, and increased demand for safe-haven assets. Many analysts expected this price rise to stimulate higher production in gold-rich countries like Ghana.

However, the reality was more complex. Despite higher prices, Ghana’s official large-scale mining output decreased, raising questions about the responsiveness of supply to price changes.

Understanding the Production Decline

The decline in Ghana’s gold production wasn’t due to a lack of economic incentive. Instead, it reflected deeper structural issues in the mining sector, including:

• Limited spare capacity in existing mines
• Long lead times for new mining projects
• Regulatory and environmental constraints
• Challenges in attracting investment

Analysis: Why Gold Supply Is Inelastic

What Is Supply Inelasticity?

Supply inelasticity means that changes in price do not lead to proportional changes in quantity supplied. In the case of gold, this happens because:

• Mining is capital-intensive: Opening a new mine or expanding an existing one requires massive upfront investment.
• Mining is labor-intensive: Skilled labor and specialized equipment are not easily or quickly available.
• Geological constraints: Gold deposits are finite and not all are economically viable to extract.
• Environmental and regulatory approvals: These can take years to obtain.

Comparison with Other Commodities

Unlike manufactured goods, where production can be scaled up relatively quickly in response to demand, gold mining operates on a different timeline. As Senyo Hosi noted, even if prices double, a mine cannot simply double its output overnight.

He compared gold to rare collectibles like the 1945 Domaine de la Romanée-Conti wine, where scarcity means that price increases have little effect on supply.

The Role of Artisanal and Small-Scale Mining

ASM is often seen as more flexible than large-scale mining and potentially more responsive to price changes. However, in 2025, ASM in Ghana faced significant regulatory headwinds:

• Restrictions on new mining concessions
• Tighter controls on the importation of mining equipment
• Increased enforcement against illegal mining

These measures, while aimed at curbing environmental damage and illegal activity, also limited the sector’s ability to expand production in response to higher prices.

The Impact of Gold Smuggling

One of the most intriguing aspects of Hosi’s analysis is the role of smuggling in distorting production data. He cited research from SwissAid and UN COMTRADE indicating that much of the reported increase in ASM production during 2025 was not due to new mining activity, but rather to smuggled gold re-entering the formal supply chain.

This means that while official statistics may show rising ASM output, the actual new production was likely much lower. Smuggling remains a persistent challenge in Ghana’s gold sector, undermining tax revenues and regulatory oversight.

Government Policy Response

Hosi acknowledged the positive impact of several government initiatives aimed at stabilizing the gold sector:

• GoldBod’s Domestic Gold Purchase Programme: Encouraged the formalization of gold sales and increased transparency.
• Stricter law enforcement: Targeted illegal mining and smuggling networks.
• Removal of withholding taxes: Improved the profitability of legal gold transactions.

These measures helped to regularize the market and improve the accuracy of official production data, even if they didn’t immediately boost output.

Practical Advice for Stakeholders

For Policymakers

To ensure sustainable growth in Ghana’s gold sector, policymakers should consider the following strategies:

• Encourage long-term investment: Provide stable regulatory frameworks and incentives for large-scale mining projects.
• Support formalization of ASM: Offer training, equipment access, and legal pathways for small-scale miners.
• Strengthen anti-smuggling efforts: Enhance border controls and international cooperation.
• Build strategic gold reserves: Use high-price periods to accumulate reserves for economic stability.
• Promote value addition: Invest in local refining and manufacturing to capture more value from gold exports.

For Investors

Investors in the gold sector should understand that:

• Price and production are not directly correlated: High gold prices don’t guarantee higher output or profits for all miners.
• Mature mines have limited growth potential: Focus on companies with strong project pipelines.
• Regulatory risk is significant: Changes in mining laws or environmental policies can impact operations.
• ASM presents both risks and opportunities: While informal, it represents a large portion of the sector and could benefit from formalization.

For Industry Stakeholders

Mining companies and industry associations should:

• Invest in technology and efficiency: Improve recovery rates and reduce costs to remain profitable even when prices fluctuate.
• Engage with communities: Build strong relationships with local populations to reduce social risks.
• Advocate for clear policies: Work with government to develop predictable and fair regulations.
• Prioritize sustainability: Adopt environmentally responsible practices to maintain licenses to operate.

FAQ

Conclusion: A Nuanced View of Gold Production

Senyo Hosi’s warning serves as an important reminder that economic theories don’t always translate directly into real-world outcomes. While higher gold prices create incentives for increased production, the reality is far more complex.

In Ghana, structural constraints, regulatory challenges, and illegal activities all play a role in limiting the sector’s responsiveness to price changes. Understanding these dynamics is crucial for anyone involved in or affected by the gold industry.

Looking ahead, Ghana has an opportunity to leverage its position as Africa’s top gold producer to drive industrialization and economic resilience. But this will require smart policies, long-term investment, and a commitment to transparency and sustainability.

As Hosi concluded, “Higher gold prices alone cannot explain Ghana’s recent production trends. A proper understanding of supply inelasticity, smuggling dynamics, and policy interventions is essential for sound economic analysis and effective decision-making.”