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UNIVERSITY OF GHANA 
COLLEGE OF HUMANITIES 
 
EFFECTS OF MACROECONOMIC VARIABLES ON GOLD PRICES IN GHANA 
 
 
BY 
RITA KORYO NGMERTEY 
(ID NO. 10636721) 
 
 
A LONG ESSAY PRESENTED TO THE SCHOOL OF GRADUATE STUDIES IN 
PARTIAL FULFILLMENT OF THE AWARD OF DEGREE OF MASTER OF 
BUSINESS ADMINISTRATION IN FINANCE 
 
 
DEPARTMENT OF FINANCE 
JULY, 2019 
  
 
 
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DECLARATION 
I hereby declare that this project is my own work and effort and that it has not been submitted 
anywhere for any award. 
 
 
  
……………………………………….. …………………………………….. 
  
RITA KORYO NGMERTEY DATE 
 (10636721) 
 
 
 
 
 
 
 
 
 
 
 
 
 
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CERTIFICATION 
I hereby certify that this research project has been submitted for examination as the University 
supervisor. 
 
 
…………………………… ............................................ 
DR. PATRICK ASUMING DATE 
(SUPERVISOR) 
 
 
 
 
 
 
 
 
 
 
 
 
 
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DEDICATION 
I dedicate this work to my Parents Mr. Patrick Tetteh and Mrs. Alberta Tetteh, and my siblings for 
all the love, support and encouragement throughout my educational journey. 
May the good Lord continually bless you, grant you long life and good health so that you enjoy 
the fruit of your labor. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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ACKNOWLEDGEMENTS 
My enormous gratitude goes to the God Almighty for the possibility to be part of this program and 
for seeing me through the difficult times. It is only by His grace that I have sailed through and I 
am forever grateful. 
I am grateful also to my supervisor, Dr. Patrick Asuming for his patience and input to ensure that 
this paper takes shape. His analysis and judgements at certain points served in getting “me to go 
beyond my comfort zone. His hard work and dedication” has made this possible. 
Special thanks to Daniel Amos Abanyie and Patrick Atoh for providing support throughout the 
duration of my study, to Pastor Francis Appiah for his help in running the time series analysis and 
to Prince Agyekum and Lorraine Agyei for checking on the status of my academic work from time 
to time. 
  
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Table of Contents 
DECLARATION ................................................................................................................................................ i 
CERTIFICATION .............................................................................................................................................. ii 
DEDICATION .................................................................................................................................................. ii 
ACKNOWLEDGEMENTS ................................................................................................................................ iii 
LIST OF TABLES ............................................................................................................................................. vi 
ABSTRACT .................................................................................................................................................... vii 
CHAPTER ONE ............................................................................................................................................... 1 
INTRODUCTION ............................................................................................................................................. 1 
1.1 Background to the study ..................................................................................................................... 1 
1.2 Research Problem ............................................................................................................................... 2 
1.3 Research Objectives ............................................................................................................................ 3 
1.4 Research Hypothesis ........................................................................................................................... 3 
1.5 Justification for study .......................................................................................................................... 4 
1.6 Scope of the study .............................................................................................................................. 4 
1.7 Organisation of thesis ......................................................................................................................... 5 
CHAPTER TWO .............................................................................................................................................. 6 
LITERTURE REVIEW ....................................................................................................................................... 6 
2.0 Introduction ........................................................................................................................................ 6 
2.1 Factors Affecting the Price of Gold ..................................................................................................... 6 
2.1.1 The economic situation of Ghana ................................................................................................ 6 
2.1.3 Supply and Demand of Gold ........................................................................................................ 6 
2.1.4 Monetary policy direction ............................................................................................................ 7 
2.1.5 Inflation ........................................................................................................................................ 7 
2.1.6 Global economic situation ........................................................................................................... 8 
2.1.7 Real interest rate.......................................................................................................................... 8 
2.2 History of Gold Mining Industry in Ghana .......................................................................................... 9 
2.3 Gold Marketing in Ghana .................................................................................................................. 11 
2.4 Relationship between Macroeconomic Variables and Gold Prices. ................................................. 12 
CHAPTER THREE .......................................................................................................................................... 15 
METHODOLOGY .......................................................................................................................................... 15 
3.1 Research Design ................................................................................................................................ 15 
3.2 Sample Size ....................................................................................................................................... 15 
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3.3 Sources of Data ................................................................................................................................. 15 
3.4 Variable Selection and Description ................................................................................................... 16 
3.4.1 Exchange Rate (EXR) .................................................................................................................. 16 
3.4.2 Interest Rate (INTR).................................................................................................................... 17 
3.4.3 Inflation rate (INFL) .................................................................................................................... 17 
3.4.4 Crude Oil Prices .......................................................................................................................... 17 
3.5 Data Analysis Methods and Techniques ........................................................................................... 18 
3.6 Estimation Model .............................................................................................................................. 18 
3.7 Estimation Strategy ........................................................................................................................... 19 
3.7.1 Unit Root Test (Stationarity Test) .............................................................................................. 19 
3.7.2 Co-integration Test .................................................................................................................... 19 
3.7.3 Long Run and Short Run Effect .................................................................................................. 20 
CHAPTER FOUR ........................................................................................................................................... 22 
DATA PRESENTATION, ANALYSIS AND DISCUSSION ................................................................................... 22 
4.1 Introduction ...................................................................................................................................... 22 
4.2 Descriptive Statistics of Variables ..................................................................................................... 22 
4.3 Stationarity Test of Variables ............................................................................................................ 23 
4.4 Cointegration Test Results ................................................................................................................ 24 
4.5 Results and Analysis of Long Run Model .......................................................................................... 25 
4.6 Results and Analysis of Short Run Model ......................................................................................... 27 
4.7 Diagnostic and Stability Test ............................................................................................................. 29 
CHAPTER FIVE ............................................................................................................................................. 31 
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ............................................................................. 31 
5.1 Introduction ...................................................................................................................................... 31 
5.2 Summary ........................................................................................................................................... 31 
5.3 Conclusions ....................................................................................................................................... 32 
5.4 Recommendations ............................................................................................................................ 33 
REFERENCES ................................................................................................................................................ 34 
 
 
 
 
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LIST OF TABLES 
Table 4.1: Descriptive Statistics Variables ................................................................................... 22 
Table 4.2: Test Result of Augmented Dickey Fuller .................................................................... 23 
Table 4.3: Johanson Cointegration Test Results ........................................................................... 24 
Table 4.4: Long run Results Coefficients ..................................................................................... 26 
Table 4.5: Short run Results Coefficients ..................................................................................... 28 
Table 4.6: Diagnostic and Stability Test ....................................................................................... 30 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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ABSTRACT 
“The purpose of this study is to examine the effect of macroeconomic variables on gold prices in 
Ghana”. The study used “made use of monthly data” sourced from  “Bank of Ghana, Ghana 
statistical service and” World Bank website. The time series estimation techniques were adopted 
in order to examine the effect of macroeconomic variables on gold prices The study shows that 
Exchange rate significantly “affect Gold prices in the long run.  Crude oil prices, Inflation and 
Interest rate did not significantly affect economic growth in the long run. The study” also found 
that that Crude oil prices and its immediate two lagged values in the short run “significantly and 
positively affects Gold prices.  Exchange rate, the third lagged value of Crude oil prices, Inflation 
and its three lagged values, and interest rate did not significantly affect Gold prices in the short 
run. It is thus “recommended that investors take advantage of the” results from the study to “their 
investment strategies” by considering both the external environment and as well the internal 
environment of the country. 
 It was further recommended that domestic firms learn from the foreign firms that are experienced 
through a collaboration in the supply chain where there is the tendency that foreign firms transfers 
the technological know-how and management to local suppliers they deal wi.th, so as to enhance 
the technological transfers and skills. 
  
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CHAPTER ONE 
INTRODUCTION 
1.1 Background to the study 
Ghana has been endowed with significant mineral deposits of which gold “is by far” being the 
most important mineral mined (Bermudez- Lugo, 2006). Ghana is still ranked as the “world’s 10th 
and Africa’s 2nd largest producer of gold, with current production estimated in excess of 2.81Moz” 
as at June 2018; rising from 2.54Moz in 2017 (Joseph &Wang, 2018).  
Gold as a metal or mineral has both commodity and monetary attributes which makes it a very 
important natural mineral in the financial markets. Gold as a recognized international trade 
commodity is considered as a significant item in central bank reserves in the world economy and 
investment in it is seen as a very formidable venture for governments and private entities because 
of its good store of value (Nadeem et al 2014; Tran & Starr, 2007).  Despite the value of this 
precious mineral commodity, “its price remains closely watched as an indicator of changing risk 
perceptions”. 
According to Nadeem et al. (2014), the price of gold is a very “good indicator to evaluate” the 
economic health of both developed and developing economies. When gold prices are high, 
investors assemble them to prevent them from being subjected to inflation hence indicating an 
unhealthy economy; whilst in the opposite, investors will switch “to other profitable investments 
like bonds, real estate”, among others indicating a healthy economy due to the low gold prices 
(Nadeem et al., 2004). As established by some literature, gold prices are for diversifying portfolios, 
hedging and risk mitigation. Le and Chan (2011) indicated that investing in gold reduces financial 
market risk. In view of this, many investors are likely to invest in the commodity for the benefit 
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of their companies among many other reasons. One inevitable point opined by Mamcarz (2015) is 
that the decision to invest in gold rests not on only knowing its price, but also the factors that 
influences gold price fluctuations. Sharing in the viewpoint of the above researches, it is therefore 
very “important to understand the” fluctuations in gold prices and the macroeconomic variables 
that play a role in it (either positively or negatively); since “gold price is a strong indicator of the” 
well-being of the economy.  
1.2 Research Problem 
The fluctuations in gold prices are very critical to investor knowledge, as these will influence the 
level of investment into this beneficial commodity for a country. The identification “of the 
relationship between macroeconomic” factors and gold prices makes it possible to explain changes 
in gold prices in the past and to make forecasts. This is of great importance for “both speculators 
and investors” committing capital in the long term. Several research works across the globe have 
brought to the pool of knowledge on the factors that affect gold prices. Research works by Wang 
et al. (2011), Le and Chang (2011), Levin and Wright (2006), Nadeem et al. (2014), Tully and 
Lucey (2007) in countries like Pakistan, USA, and the Asia, have touched on different 
“macroeconomic variables such inflation, oil prices, interest rates, exchange rate and” others to 
have relationships with gold prices; however, report from Ghana is lacking.  
Ghana is a notable country rich in the precious mineral gold in Africa. The gold as a commodity 
and its “prices play a significant role in the” determination “of the gold prices” in the country 
together with other commodities such as oil, cocoa and timber. Though gold as a commodity is 
significant in Ghana’s developing economy, literature and previous research works on the 
commodity have not focused on how its prices fluctuate and what relationship it has with other 
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“macroeconomic variables such as interest rates, exchange rates, inflation, oil prices and” other 
“macroeconomic variables. Most of the research” works including that of Tweneboah and Adam 
(2008), Adu (2012) among others have focused on the effect of gold prices as a macroeconomic 
variable on stock prices. This has led to a dearth of information on how macroeconomic variables 
impact or affect gold prices in the country. Therefore, “this study seeks” to address the identified 
gap in research studies with reference to the commodity by looking at the impact of selected 
“macroeconomic variables on the gold prices in” Ghana.  
1.3 Research Objectives 
“The objective of the study is to find out the effects of macroeconomic variables on” gold prices 
in Ghana. The study will specifically aim at: 
1. Analysing “the impact of exchange rate on gold prices”. 
2. Analysing the impact of “crude oil prices on gold prices”. 
3. Identifying the “impact of interest” rate on the “gold price”. 
4. Ascertaining “the impact of inflation on the gold prices”. 
 
1.4 Research Hypothesis 
In view of the objectives of this study, four research hypothesis are assumed. These include: 
1. Hypothesis Assumed (H0): Gold prices do not depend on exchange rate in Ghana.  
2. Hypothesis Assumed (H0): Gold prices do not depend on crude oil prices in Ghana. 
3. Hypothesis Assumed (H0): The interest rate does not affect gold prices in Ghana.  
4. Hypothesis Assumed (H0): The inflation rate does not affect gold prices in Ghana. 
 
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1.5 Justification for study 
In justifying the importance “of this study the following are expected that”; 
1. The findings “of this study” will help identify the “main macroeconomic factors that” 
affects gold prices “in Ghana, taking into consideration” inflation rate, “exchange rates, 
crude oil prices and interest rates”.  
2. The study seeks to provide reliable findings to investors and the government policy makers 
in gold investment “using more recent data points” (2009 - 2018) “especially considering 
the recent drastic changes in the Ghanaian” macroeconomic variables and how it affects 
the fluctuations “in the prices of gold”. 
3. The findings of this “study will add to the pool of literature on the” commodity in question 
and bridge the gap that exists in literature with respect to gold prices fluctuations in Ghana 
4. The “findings of this study will serve as a” baseline research for students and “as a 
reference material” for use in future studies by other researchers.  
 
1.6 Scope of the study 
This study will investigate “the effect of macroeconomic variables on” gold prices. It has been 
noticed that “a number of researchers in various countries have found significant relationships 
between macroeconomic variables and gold prices” (see Nadeem et. al., 2014; Hashim et al., 2017; 
Sukri et al., 2015). These studies used multiple regression “models which incorporate 
macroeconomic variables as explanatory factors” being the independent variables. The “following 
methodological approach is adopted in this study for establishing the relationship between 
macroeconomic variables and” gold prices in Ghana. 
 
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1.7 Organisation of thesis 
This research “is organized into five main chapters”. “The first chapter” will introduce the study 
which will comprise “the background of the study, the problem statement, the objectives, research 
questions”, brief methodology, significance, organisation and limitation of the study. “The second 
chapter” will review “the relevant literature, both theoretical and empirical”, on how 
macroeconomic variables and gold prices relate. Chapter three will concentrate on the 
methodology used, which will provide in-depth information on the research design, research 
strategy, “study population, sources of data”, econometric models “and analysis techniques, as 
well as the profile of the study area”. “Chapter four will presents the results, analyses, 
interpretation and discussion. Chapter five” will summarize the outcome of the research work and 
provide the “conclusion and recommendations”. 
 
 
 
 
 
 
 
 
 
 
 
 
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CHAPTER TWO 
LITERTURE REVIEW 
2.0 Introduction 
“This section looks at the literature review for the study”. It is made up of the elements affecting 
gold prices, the “history of Gold Mining” Industry in Ghana, Gold Marketing in Ghana and studies 
on the “relationship between macro-economic variables and” gold prices. 
2.1 Factors Affecting the Price of Gold 
The factors provided below affects the movement in prices of Gold. These factors presented are 
the closer ones to gold prices. 
2.1.1 The economic situation of Ghana 
The US Dollar for Gold is an indicator of the rate of exchange of Ghana cedi’s in the market for 
foreign exchange internationally, and is negatively related with gold prices internationally.  When 
there is a fall in US Dollar, the value of the Ghana cedis appreciate and the gold value decreases, 
investors therefore do not invest much into gold. This results into a lower demand for Gold. 
2.1.3 Supply and Demand of Gold  
Demand for Gold is mainly to consume, deposit and invest. Normally gold prices are “determined 
by international economic” development. “When there is a rise in an economy”, gold demand also 
increases as well. The central banks holdings of official gold are “used as a guard against financial 
risks”. For investors that are regular “gold is an investment and is used” as a hedge in opposition 
to inflation. The World gold council said that there was an increase in demand for gold by 15 
percent during “the first half of 2016 to 2,335 tons” and demand for investment increased by 16 
percent. This has been the highest since 2009. “However, gold supply increased by 1 percent 
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during the first half of 2016, which” was the slowest in supply of gold from the first half of 2008. 
This growth in supply is less than the growth in demand, and became “one of the reasons for the” 
rise in gold prices in 2006. 
2.1.4 Monetary policy direction 
The specific implementation of monetary policy includes increasing the deposit-reserve ratio, 
lifting the discount rate and so on. The implementation of monetary policy may also have an impact 
on the supply of money. Increasing the money supply can lead to a decline in the purchasing power 
of the currency. “A decrease in the purchasing power of the currency, which in turn” will cause 
“the price of gold” rises. Conversely, a decrease in the supply of money may result in the 
purchasing power “to increase and the price of gold the” fall. On one hand, tightening monetary 
policy is usually reflected in the market interest rate increases. Interest rates increases make the 
cart holding gold rise. This should weaken the demand for inventory.  
2.1.5 Inflation 
Gold has a function of building against “inflation. Gold hedging function in inflation is expected 
or has occurred when investors reflect” on “a lot of investment funds from the bond stock market 
into the gold market, leading to gold” price rises. The reason gold and its derivatives is used as a 
hedge to inflation is that its price moves in opposite direction of the value of the dollar. Therefore, 
if inflation “reduces the value of the dollar, the price of gold” rises. “The important factor effecting 
the price of gold is the real interest rate. The real interest rate is the nominal interest rate adjusted” 
for inflation. In periods “when real interest rates” are low, “people are more willing to hold gold”. 
 
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2.1.6 Global economic situation 
Economic development leads to increased need for global liquidity. Therefore, this increases the 
scale of investment in various derivatives, thus contributing to a rise in gold prices. During an 
economic crisis, global liquidity is reduced, but because “gold is a safe-haven in” a period of 
uncertainty, international gold prices will rise. In addition, global economic development will 
increase the residents of gold consumption and investment needs. China and India have a tradition 
of gold consumption, as the two countries try to accelerate development of their economies, the 
demand for gold also increases. Because gold's consumer demand “is relatively stable and” safe-
haven demand tends to lead to overshoot of the gold price, the overall effect is that when GGP is 
less ‘than expected or” is “significantly slower than the previous period, gold” prices “will form 
short-term support, and” vice versa. 
2.1.7 Real interest rate 
When the economy is overheated or inflation is rising, many central banks will raise interest rates 
and tighten credit. After the overheated economy and rising inflation are effectively controlled, the 
country will lower the interest rate. “If the interest rate of a certain currency rises, then the interest 
income from holding such a currency will increase”, “attracting investors to buy the currency”, so 
that the currency” will be favourably supported. On the contrary, the return to holding the currency 
will be weakened if domestic interest rates fall. “The price of gold is affected by interest rates, but 
it is mostly effected the real interest rate. The real interest rate after deducting” “inflation is the 
opportunity cost of holding gold”. In times when the real interest rate is negative, people are more 
willing to hold gold. 
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2.2 History of Gold Mining Industry in Ghana  
Gold trade in Ghana was first recorded in the thirteenth and fourteenth centuries, “when open cut 
gold mining and gold smithing were one of the main tasks in the Asante kingdom”. In between the 
fifteenth and the seventeenth century, the world’s most important gold producer was Gold Coast;. 
This brought about the name “guinea” for British gold coins (Von Gnielinski, 1986). About 40,000 
workers were working in the Asante mines around the peak production in the 1700 (Asamoa, 
1996). The “18th and 19th century travel reports point to the vast riches of the Asante kings, as 
well as the  versatility of their goldsmiths”. The gold mining activities in the country were stopped 
because slave trade had begun and the traditional source of workers from Benin had dwindled. 
“Modern mining begun with the redetection of gold in 1878 at Tarkwa, and later on at Obuasi with 
the foundation of Ashanti Goldfields in (1897), Prestea and Dunkwa”.  
To show the extend of mining and the exploration of the jewellery material Anyemedu, (1991) 
expands on the extent to which mining was organised in the seventeenth century, where 450 mining 
co-operations were founded. Three thousand five hundred (3500) licenses for exploration were 
issued together with the construction “of a railway line between Obuasi and Takoradi” harbour, to 
transport goods and services (Gnielinski, 1986).  
A huge “number of companies had to close down or to merge, and the production” of gold 
continued to stay at about 200,000 ounces per annum till 1930. “It was only when the pound 
sterling value of gold was inflated in 1931 that dormant mines were reopened”. The gold 
production after that increased “to 818,000 ounces in 1940” (Agbodeka, 1992). Up “until 
independence in 1957, the mines were relying on cheap migrant labour from the North and as a 
result saw no need” to increase labour “productivity through education and training. The Technical 
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Training Institute at Tarkwa was established” in 1952 for traineeship training. After independence 
in 1962 this “Institute was changed to School of Mines”. The school was offering a “3-year 
diploma course in Mining Engineering”. Certain mining traineeship subjects were introduced in 
1962 for mine mechanics. The School of Mines in 1962 “became part of the University of Science 
and Technology” and they offered “degree courses in mining engineering” (Agbodeka, 1992). The 
government in 1965 instituted the “State Gold Mining Corporation”. 
“The company took over five mines that had been left behind by foreign mining corporations. The 
mines had hit poorer gold reefs, and the owners were not willing to invest in the production in new 
reefs” (Schmidt-Kallert, 1994). From that moment on, poor management, “lack of qualified and 
experienced staff along with rising production costs” and low productivity led to “in a continuous 
decline of output”.  
“In 1972, the government took ownership in all natural resource-based industries in the country, 
in particular a 55 percent share in the country’s largest gold mine”, Asante Goldfields (Von 
Gnielinski, 2008). 
The minority owner UK-based Lonrho, was left with Technical management. However, there was 
a decline in “gold production from 533,000 ounces in 1972 to 232,000 ounces in 1982” due to lack 
of foreign exchange for the purchase of equipment and supplies.(Winfred, 1996). The 
rehabilitation of the mining sector was one of the core actions “in Ghana’s reform program”. The 
government of Ghana in 1996 passed a new Minerals and Mining bill to restore current mines and 
also attract foreign investors. The definite measures included a new fiscal regime, the supply of 
“foreign exchange for the purchase of machinery and equipment”, and the creation of the 
“Minerals Commission. The World Bank furnished finance and consulting assistance for the” 
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restoration of “the State Mining Corporation and for the upgrading and expansion of Ashanti 
Goldfields “(Anyenedu, 1991). The first foreign members, “Southern Cross, came in 1988”, after 
which  “Teberebie and Bogosu in 1991, Gold” Fields Ghana in 1993 (Anyenedu, 1991), “and 
Barnex and Dunkwa in 1995” Ghana Chamber of Mines, (1996) also followed. Since then, gold 
production has soared. 
2.3 Gold Marketing in Ghana  
“In an effort to create avenues for small-scale miners to sell” their products, “the Precious Minerals 
Marketing Corporation (PMMC) was established. Although vestiges of the organization go as far 
back as 1963, when the Diamond Marketing Corporation was established and shortly after 
incorporated by Legislative Instrument (LI) No. 401 of 1965 as a state corporation, the Precious 
Minerals Marketing Corporation Law (PNDC Law 219) of 1989 officially established the PMMC. 
The law granted the organization authority to buy and sell gold in addition to diamonds. Its mission 
is to buy from small-scale miners, and to sell precious minerals profitably in order to enhance 
foreign-exchange earnings from the sector. The corporation has some 750 licensed buying agents 
and subagents who travel” around the country, purchasing “gold from artisanal miners and then 
sell it back to the corporation; only” bars are procured by the Corporation. “This mandates that all 
customers get a whiff of gold in the form of fine powder before offering it for sale” (UN, 1996). 
The PMMC carries out a number of other business including the following in addition to Buying 
and selling: “The grading, assaying, valuing and processing of precious minerals, the appointing 
of licensed buying agents for the purchase of precious minerals produced by small-scale miners; 
and promotion of the development of precious minerals and jewelry industries in Ghana”. 
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2.4 Relationship between Macroeconomic Variables and Gold Prices.  
Weng et al., 2011 studied the short-run and the long-run correlation between Consumer Price Index 
“and the Prices of Gold in the United States and Japan”. The study used data from 1971 to 2010. 
The study adopted the time series approach, and found “that if there is a long run relationship 
between the Prices of Gold and inflation in United States and Japan”, then it can be said “that gold 
is a hedge against Inflation”. Selection of time and the selection of the market was stated in their 
study as” important keys of inflation hedge”. The study concluded “that gold is not an inflation 
hedge in” Japans case whiles in the case of United States “it is a good hedge against inflation”.  
In a study by Levin and Wright (2006), “they studied the long and short run determinants of prices 
of gold. The study used gold lease rate, exchange rate, inflation, political risk and credit risk 
default” as independent variables. The study made us of data spanning from 1976 to 2005. The 
study found a “long run relationship between Inflation (CPI) and prices of Gold in the United 
States. This means that gold can be used to hedge inflation. The study further found a statistically 
significant relationship between United States Dollar exchange rate and the prices of gold”.  
In studies by Dupuis et al., (2006) studied on the “anticipation of investors behaviour and 
intentions in near future for gold investment by considering the variables that influences gold 
prices like the United States dollar, consumer demand, inflation and production of gold”. It was 
realised that “gold and United States dollar has strong negative correlation”. When “US dollar 
appreciates, the prices of gold declines. Di Bartolomeo (1993) studied whether gold price 
dominates gold related equity securities i.e common stock in gold mining companies”. CAPEM 
model, “descriptive methodology, and linear regression models were used”. It was found in his 
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study that equities in “gold mining do not rely on the prices of gold”. But rather on “expectations 
of inflation, level of international economic and political instability”. 
Gunes et al., (2010) made “an analysis of the impact of interest rate”, prices of oil and the Euro 
dollar “exchange rate on the gold price rises”. The “study made use of data” from 2000 to 2009 
“to analyse the relationship among variables”. Ordinary Least Squares and the cointegration 
approach were used as the analytical techniques in this particular study. “Findings from the study 
indicates that there is a positive relationship between the prices of oil”, Euro-Dollar parity and the 
prices of gold. The study further “found a negative relationship between gold prices and rate of 
interest”.  Thus when “interest rate declines, people reduces money” deposited in the bank and 
resort to investment in gold. 
Sjaastad in 2004 studied on the “empirical relationship between gold price and major exchange 
rates”. Inflation and exchange rates were the two variables “used as explanatory variables. The 
study adopted the daily and monthly data from 1991 to 2004”. The Ordinary Least Squares 
approach and the market efficiency tests were used to analyse the data gathered for the study to 
ascertain the correlation among variables. “The study found that there is a negative significant 
relationship between exchange rate and prices of gold”. 
Bapna et al., (2012), asserted that gold demand is sensitive and related with macroeconomic 
conditions in the world. The prices of gold is difficult to predict, anticipate and explain. The study 
looked at the impact of “Gross Domestic Product (GDP), Exchange rate”, Growth rate, interest 
rate and inflation on the prices of gold. The study employed the “unit root test, regression analysis 
method and the granger causality test” to make analysis of the data. The trend analysis was also 
used to analyse the trends among the macroeconomic variables. Data was collected from 2002 to 
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2011, which is a 10 year period span on quarterly basis. The study discovered that “fiscal deficit, 
exchange and forex reserve inflation rate” independently influences gold price on a large scale. On 
the other hand “GDP, BSE Sensex and the the NSE index” have a very low impact indepently on 
the prices of gold. The findings further shows that gold prices does not cause and affect the rate of 
exchange, “BSE Sensex, NSE Index, forex reserves and fiscal deficit, but gold” prices does “affect 
the rate of interest and inflation and vice versa”. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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CHAPTER THREE 
METHODOLOGY 
3.1 Research Design 
This research is designed to be a “quantitative research as it involves a systematic empirical inquiry 
into how macroeconomic factors” (independent variables) affect gold prices (dependent variable) 
“in Ghana, using mathematical and computational techniques”. The study though quantitative in 
nature will be “an explanatory research because it seeks to determine the effects of macroeconomic 
factors on” gold “prices in Ghana. The use of statistical data and mathematical techniques is 
essential because it is hoped that the findings yield an unbiased result that can be extrapolated to 
some extent. Hence, the process of measurement of the macroeconomic factors and the” gold 
prices is “vital since it provides the fundamental connection between the two variables”. 
3.2 Sample Size  
This study which is an “empirical analysis of the effect of macroeconomic variables on gold” 
prices will be “carried out using quarterly data”. “The sample period span is from” 2009-2018 and 
the study is carried out using 40 quarterly observations (translating into 160 monthly observations). 
The study will be limited to this period as a result of the redenomination of the Ghanaian currency 
in 2008, as this will ensure consistency in measurement. The “macroeconomic variables to be 
considered include inflation rate, exchange rate, crude oil prices and interest are the” independent 
variables. 
3.3 Sources of Data 
“Data for the study will be mainly obtained from secondary sources’. Available “monthly data 
series that were collected include inflation rate, exchange rate, crude oil prices and” interest. These 
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data “will be collected from secondary sources such as the Ghana Stock Exchange, the Ghana 
Statistical Service, the Bank of Ghana” and World Bank websites. 
The Cedi –US “dollar exchange rate and interest rate will be obtained from Bank of Ghana. 
Inflation rates” will be also “obtained from the Ghana Statistical Services. Data on the crude oil 
prices” will be collected from the World Bank Indicators website. Quaterly data will be used for 
“consistency and a more credible result”, as Quaterly data to be collected will “provide enough 
data points over the stipulated period”. 
3.4 Variable Selection and Description  
The aim of this research is to outline “the effects of macroeconomic variables on gold prices in 
the” Ghanaian economy. Four of the selected “macroeconomic variables used in this study have” 
been identified from various literature to pose an effect to “gold prices and are correlated with each 
other. A brief description of the variables is presented” in the subsections below.  
3.4.1 Exchange Rate (EXR)  
“This is the price of a currency in terms of other currency”. The “US dollar is the most traded 
currency in Ghana, hence its inclusion in the macroeconomic variables in this study. The dollar to 
cedi exchange rate is very important as it determines the cost of imports and exports as well as 
other foreign transactions in the country”. In “this study, we use the Ghana cedi expressed in terms 
of the US dollar (that is, cedi-dollar exchange rate). Since Ghana is not in autarky, changes in the 
exchange rate affect the import demand, competitiveness and profitability of companies via 
changes in cost of production as well as changes in expected cash flow. Where the economy is 
import-driven, a depreciation of the Ghana cedi increases cost of production which depresses 
future cash flows and profits”.  
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3.4.2 Interest Rate (INTR)  
“Interest rates in a country tend to influence domestic economic activities. In that, low interest 
rates encourage capital expenditures by individuals and businesses because their cost of borrowing 
will be low. These expenditures often improve the economy in a country through increased 
employment, increased production and trade”. The “91-day Treasury Bill will be used as a proxy 
for the interest rates in Ghana since Treasury Bill serves as the opportunity cost of holding shares” 
or money. “High interest rate makes cost of borrowing high hence negatively impacting on 
economic activity. Increases in the cost of loans of listed companies resulting from high lending 
rates undoubtedly put a depressing effect on corporate profit and dividends. Thus, increases in 
interest rates have indirect impact on” gold prices.  
3.4.3 Inflation rate (INFL)  
“Inflation measures the rise in price of goods and services. Hence, a higher inflation rate reduces 
the purchasing power of each unit of currency”. Increases in “inflation increase the cost of living 
thus channeling scarce resources meant for investment to consumption. This decreases the demand 
for investment and” possibly gold prices.  
3.4.4 Crude Oil Prices  
Ghana imports most of the crude oil that is consumed in the country even though crude oil is 
produced in the country to some extent. Hence it is significant to “include crude oil prices in the 
study”. This is because the world oil prices have an effect on “industrial production and 
profitability”. The crude oil is considered to be a factor for inflation. As crude oil prices increase, 
the economy will always falls into a trough which leads to an “upward pressure on inflation”. 
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People then tend to invest in gold as means “to hedge against inflation”. It can therefore be inferred 
that there exists “a relationship between gold and crude oil prices”. 
3.5 Data Analysis Methods and Techniques 
The “quantitative data will be analyzed based on a time series model to identify the relationship 
that exists between macroeconomic factors and gold prices”. In analyzing the data obtained three 
techniques will be used including Stationarity analysis, unit root analysis and the long-run and 
short-run analysis. 
3.6 Estimation Model 
To be able to arrive at “the effect of effect of macroeconomic variables on gold prices, the study 
“specifies the following models:  
𝐺𝑃𝑅 = 𝑓(𝐸𝑋𝑅, 𝐶𝑅𝑂𝑃, 𝐼𝑁𝐹, 𝐼𝑁𝑇)…………………………………………………………....... (1) 
Where: GPR represents Gold Prices; EXR stands US dollar to Ghana Cedi exchange rate; CROP 
represents Crude Oil Price, INF stands for Inflation, and finally INT stand for Interest Rate. 
The model that will be estimated explicitly is: 
GPR𝑡 = 𝛂0 + 𝛂1EXRt+𝛂2CROit+𝛂3𝐼𝑁𝐹𝑡 + 𝛂4𝐼𝑁𝑇𝑡 +  𝑢t …………………………………… (2) 
Where  α0,α1,α2,α3,and α4 are the parameter estimates, µ𝑖 is the stochastic error term, t is the 
sample period. 
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3.7 Estimation Strategy  
3.7.1 Unit Root Test (Stationarity Test)  
“In the use of time series, most macroeconomic variables are likely to be non-stationary and as a 
result, regression with non-stationary series is likely to generate” spurious “regression not suitable 
for making correct inferences”. “The study tested for stationarity using the Augmented Dickey 
Fuller (ADF) tests for unit root”.  
“ADF test is run with or without a trend at both levels and first difference”. The ADF test can be 
expressed as below;   
∆ 𝑦 = 𝛼0 + 𝛼1𝑡 + 𝛿𝑦 +
∑𝑚𝑡−1 𝑖=1 𝑎𝑖∆𝑡−1 +. 𝑡 𝑣𝑡………………………………………………… (3)  
  “where; 𝑦   is a vector of time series variables under consideration in the regression, t denotes 
time trend, 𝑣 denotes the” stochastic term, m denotes the optimal lag length, ∆ denotes first 
difference operator, “The test is conducted with a null hypothesis of H0: δ = 0 as against an 
alternative hypothesis that H1: δ < 0. The null hypothesis here again, states there is presence of 
unit root in the series whiles the alternative hypothesis states there is no unit root in the series”. To 
determine the optimal lag “length, possible models are estimated” using information criteria and 
making sure “there is no serial correlation”.   
3.7.2 Co-integration Test  
After performing the unit root tests for stationarity, “co-integration analysis is also employed to 
determine the long run relationship of the variables” in the model. “Two or more series are said to 
be co-integrated”, if they exhibit a well-established “long run relationship or a common trend”. 
Hence when two or more series are not co-integrated, there would be spurious regression problems 
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with almost meaningless analysis to be made. However, “if a long run relationship exists between 
two variables and the variables” are rising as a result of them being trended, there would always 
be a common trend that would link them together. “A co-integration test is best carried out for 
series after testing for stationarity to determine the long run relationship among the variables” in 
the model. The study tests for co-integration using the Johansen method. 
3.7.3 Long Run and Short Run Effect 
The study also formulated a long-run model to test for the long-run effects between the explanatory 
variables and the dependent variable and as well to analyse the short-run effects. The long-run 
model is specified below: 
𝑎 𝑏 𝑐
= 𝐶′ ′ ′ ′ln 𝐺𝑃𝑅 + ∑ λ𝑖ln 𝐷𝐸𝑋𝑅𝑡−𝑖 + ∑ 𝜇𝑗ln 𝐷𝐶𝑅𝑂𝑡−𝑗 + ∑ 𝜋𝑘ln 𝐷𝐼𝑁𝐹𝑡−𝑘 +𝑡  
𝑖=1 𝑗=1  𝑘=1
+ ∑𝑒 ′𝑚=1 𝜌𝑚ln 𝐷𝐼𝑁𝑇𝑡−𝑚 +  𝜀𝑡……………………………………………………………… (4) 
The study also used the ECM model specified below to explain the short-run relationships. 
𝑎 𝑏 𝑐
" " " "
Dln 𝐺𝑃𝑅 = 𝐶 + ∑ λ𝑖Dln 𝐷𝐸𝑋𝑅𝑡−𝑖 + ∑ 𝜇𝑗Dln 𝐷𝐶𝑅𝑂𝑡−𝑗 + ∑ 𝜋𝑘Dln 𝐷𝐼𝑁𝐹𝑡 𝑡−𝑘 + 
𝑖=1 𝑗=1  𝑘=1
+ ∑𝑒𝑚=1 𝜌
"
𝑚ln 𝐷𝐼𝑁𝑇𝑡−𝑚 + 𝜑𝐸𝐶𝑀𝑡−1 + 𝜀𝑡    …………………………………………………..(5) 
With all the parameters already explained, the short-run ECM model distinguished itself from the 
long-run model by regressing the variables at their first difference. Where the parameter φ 
“measures the adjustment speed” towards equilibrium “in the long-run, the” term ECMt-1 denotes 
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short-run disequilibrium adjustments of long-run error term estimates as argued by Twumasi 
(2012) citing Banerjee et al. (1993).  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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CHAPTER FOUR 
DATA PRESENTATION, ANALYSIS AND DISCUSSION 
4.1 Introduction 
This section looks at the data presentation, analysis and discussion. It is made up of the descriptive 
statistics of variables, stationarity test of variables, “cointegration test, the long run and short run” 
analysis and the diagnostic test. 
4.2 Descriptive Statistics of Variables 
The study conducted analysis on “the descriptive statistics of variables” under study, and the 
results are presented below; it is realised that Gold prices had a mean value of 1159.469, with a 
minimum value of 760.76 and a maximum of 1170.13. It also recorded a standard deviation of 
292.137. It is also realised that Exchange rate received a mean value of 1.357 with a minimum of 
0.975 and 1.551. It also recorded a standard deviation of 0.181. Crude oil prices also received a 
mean value of 87.998 “with a minimum value of 43.29 and a maximum value of” 134.79.It also 
recorded a standard deviation of 134.79. “Inflation on the other hand” recorded a mean value of 
14.224 with a “minimum value of 8.72 and a maximum value of” 20. It also recorded a standard 
deviation of 3.9122 Interest rate realised a mean value of 16.551, “with a minimum value of 8.5 
and a maximum value of” 27.8. It also recorded a standard deviation of 6.976. 
Table 4.1: Descriptive Statistics Variables 
  
Variable Mean St. Dev Minimum Maximum 
GPR 1159.469 292.137 760.76 1770.13 
EXR 1.357  0.181 0.975 1.551 
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CRO 87.988 24.392 43.29 134.79 
INF 14.224  3.9122 8.72 20 
INT 16.551 6.976 8.5 27.8 
 
 
4.3 Stationarity Test of Variables 
The Augmented Dickey-Fuller analysis test was used to conduct the stationarity test for the 
independent and the dependent variables used for the study. From the ADF results, the null 
hypothesis which indicates the “presence of unit root in the variables” used could not be rejected. 
This indicated “that the variables were non-stationary at” that level. The variables were first 
differenced and then the “null hypothesis of the unit root” was rejected at both “5% and 1% level 
of significance. It is concluded that all the variables” that were “used in the research study were 
integrated at first order” at first difference. 
Table 4.2: Test Result of Augmented Dickey Fuller  
Variable Constant only Constant and Trend 
lnNGPR    0.061 -2.458 
lnEXR - 3.497* -2.642   
LnCRO -1.014 -1.294 
lnINF -0.749   -2.206 
lnINT --0.292 -2.798 
   
lnNGPR -6.261** -6.345** 
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lnEXR -3.431* -4.323* 
LnCRO   -3.577* -3.578* 
lnINF -12.326** -12.725** 
lnINT -3.977** -4.421** 
Output from Stata:13,  ** and * represents the rejection of null hypothesis at 1% and 5% levels of 
significance respectively. 
4.4 Cointegration Test Results 
“Given that the variables used in this research work were integrated of the same order, co-
integration analysis were performed to estimate” whether there exist a long-run and “short-run 
“relationships amongst the variables. Co-integration analysis suggest that the linear combination 
of the variables should be stationary. Johansen maximum likelihood of co-integration was 
employed in this research study. Table 3 and Table 4 indicates the Trace Statistics and the” 
Maximum “Statistics of Johansen Co-integration test respectively”. 
It is “realised that the null hypothesis of no” rank (rank zero) is rejected at 5 percent significant 
level both at the trace statistics and maximum statistics. This means that “there is the existence of 
cointegration among the variables” and hence “a long run equilibrium of the variables in the study” 
can be inferred.  
Table 4.3: Johanson Cointegration Test Results 
Maximum Maximum 5%CV Trace statistics 5%CV 
    Rank statistics 
0 36.4195 33.46 96.7738 68.52 
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1 26.2425 27.07 60.3543 47.21 
2 18.8681 20.97 34.1118 29.68 
3 11.8426 14.07 15.2437 15.41 
4 3.4011 3.76 3.4011 3.76 
5     
Output from Stata:13,  *  represents the rejection of null hypothesis at 5%  levels of significance 
respectively. 
4.5 Results and Analysis of Long Run Model 
The study conducted the long run estimates of the model since cointegration was established 
among the variables under study. The results for the long run estimates are presented in table 4.4. 
From table 4.4 it is evident that “there is a negative effect of Exchange rate on Gold prices in the 
long run in” Ghana. The relationship is significant. The Coefficient of -0.9907means that there is 
an inelastic response of Gold “prices to Exchange rate”. Thus there is less than proportionate 
response of Gold “prices to changes in Exchange rate”. Therefore all things being equal, a 
percentage increase in Exchanges to 0.9907 percent decreases in Gold prices. The possible “reason 
behind this is that as the exchange rate goes up, the domestic currency” depreciates. Therefore 
purchasing Gold for domestic consumption in terms of the “foreign currency will become more 
expensive”. “The study is consistent with the study” by Ndem et al., 2014, who “found a negative 
and significant” effect of exchange rate on gold prices. The study is also “consistent with the” 
study by Nurulhuda, 2014, who “also found a negative relationship between Exchange rate and 
Gold prices”. 
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“The results shows a negative effect of Crude oil on Gold prices”. The Coefficient of -
0.0029simply means that there is an inelastic response of “Crude oil prices on Gold prices”. Thus 
there is a less than proportionate “response of Gold prices to changes in Crude oil prices”.  
Inflation also shows a positive and insignificant effect on Gold prices. The Coefficient 0.0620 
simply means that there is an inelastic response of Inflation on Gold prices. Thus there is a less 
response of Gold prices to changes in Inflation.  Therefore “all other things being equal, a 
percentage increase in” Inflation leads to 0.0620 percent increases in Gold prices. This relationship 
is consistent with the study by Nurulhuda, 2014, who also found no “significant relationship 
between Exchange rate and Gold prices”. However this contradicts the studies by Warda et al., 
2014 and Sindhu, 2013, “who found that there is a” significant effect on Gold prices. 
Interest rate on the other hand also “has a positive and significant effect on Gold prices in the long 
run. The Coefficient of” 0.0025 means that there is an inelastic response of Interest rate on Gold 
prices. Thus there is a less response of Gold prices to changes in Interest rate. All other things 
being equal, a percentage increase in “Interest rate leads to” 0.0025 percent increases in Gold 
prices. 
Table 4.4: Long run Results Coefficients 
 Coefficient Std. Error T 𝒑 > (𝒕) 
Constant 0.0637 0.0138 4.61 0.000 
LnEXR      -0.9907         0.2852    -3.47       0.002 
LnCRO -0.0029 0.0506 -0.06 0.954 
LnINF 0.0620 0.0961 0.64 0.525 
LnINT 0.0025 0.0500 0.05 0.959 
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ARDL based on SBC     
 * and ** represents “the rejection of null hypothesis at 5% and 1% levels of significance 
respectively”. 
4.6 Results and Analysis of Short Run Model 
The study looked at the “short run dynamics among the variables” using the Error Correction of 
the ARDL approach. The R squared of 0.78102 means that the model explains up to 78.1% “of the 
variations in Gold prices”. “The coefficient of the error term is negative and significant” at one 
percent level. The statistical significance as well as the size of the coefficient with regards to the 
error term shows the extent at which the model has the tendency after a short run shock to return 
to the “long run equilibrium. The” results shows a high “speed of adjustment in the long 
equilibrium to short run shocks” every year. Thus the long run equilibrium adjusts by 243 percent 
after a short run shock every year. Table 4.5 presents the estimated short run results “based on the 
Error Correction Model”. 
It is realised form the table that “Exchange rate in the short run also have a positive and 
insignificant relationship with” Gold prices. The coefficient value of 1.1493 signifies that there is 
an elastic responds of Gold prices to changes in Exchange rate.  
It is realised that Crude oil prices and lagged period in the short-run have a positive significant 
effect on Gold prices. The coefficient of 0.2056 implies an inelastic “response of Gold prices to 
changes in crude oil prices”.  The coefficient of 0.4103 and 0.2701 shows that there is an inelastic 
“response of Gold prices to changes in Crude oil prices in the short run”. The study found that a 
one percent increases in the current value of Crude oil prices leads to 0.2056 percent increases in 
Gold prices in the short run. The coefficients of 0.4103 and 0.2701 shows that a percentage 
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increases in the first two lags of Crude oil leads to 0.4103 and 0.201 respectively. However the lag 
3 of “Crude oil has no significant effect on Gold prices”. This contradicts the study by Ndem et 
al., 2014, who “found a negative and significant effect of crude oil prices on gold prices”. 
It is also evident from table 4.5 “that there is a negative and insignificant effect of” the current 
value of Inflation on Gold prices. Thus there is an inelastic “response of Gold prices to the” current 
value of Inflation. An increase in the current value of inflation, however leads to 0.0816 percent 
decrease in Gold prices in the short run.  However the three immediate lagged values of Inflation 
have a positive and insignificant effect on Gold prices. 
In the short run Interest rate is found to have a negative and insignificant effect on Gold prices. 
The coefficient of -0.0158 means that there is an inelastic “response of Gold prices to changes in” 
Interest rate. Thus a one percent change in Interest rate leads to 0.0158 percent decreases in Gold 
prices.  
Table 4.5: Short run Results Coefficients 
 Coefficient Std. Error T 𝒑 > (𝒕) 
∆LnEXR 1.1493 0.8507 1.35 0.189 
∆LnCRO 0.2056 0.1053 1.95 0.063 
             ∆LnCRO-1 0.4103 0.1116 3.68 0.001 
              ∆LnCRO-2 0.2701 0.1141 2.37 0.026 
             ∆LnCRO-3 0.0349 0.0905 0.38 0.705 
                    ∆LnINF -0.0732 0.2254 -0.32 0.748 
             ∆LnINF-1 0.0816 0.2103 0.39 0.701 
           ∆LnINF-2 0.2234 0.1880 1.19 0.246 
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          ∆LnINF-3 0.1487 0.0930 1.60 0.123 
                   ∆LnINT-1 -0.0158 09256 -0.17 0.865 
ECM(-1) -2.4385 0.4128 -5.91 0.000 
R-Squared 0.78102    
ARDL based of SBC     
 * and ** represents the rejection of null hypothesis at 5% and 1% levels of significance 
respectively. 
4.7 Diagnostic and Stability Test 
From table 4.7 it is evident that the probability value of test on heteroskadasticity is 3.436, which 
implies the non-rejection of the null hypothesis that there is no heteroskadasticity. Hence a 
heteroskadasticity is not a problem in this model. 
The study performed a normality test to also ascertain the normal distribution of variables under 
study. Thus the study employed the “Jarque-Bera Normality Test. The results show a Jarque-Bera 
normality test” results of -1.830 with a probability of 0.410. This simply means “that the null 
hypothesis that the data is not normally distributed is rejected” and hence a conclusion “that the 
data is normally distributed”. 
Finally it is evident in the Breusch-Godfrey test that the computed F-Statistics of 0.014 is 
insignificant since it has a probability value of 0.907. This simply “means that there is no existence 
of Autocorrelation in the model”. Thus there is a constant variance of the residuals.  
 
 
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Table 4.6: Diagnostic and Stability Test 
  F-Statistics Probability 
Heteroskedasticity Breusch-Pagan-Godfrey 3.436 0.064 
    
Normality Test Jarque-Bera Normality Test -1.830 0.410 
    
Autocorrelation Breusch-Godfrey LM-Test 0.014 0.907 
    
Output from Stata: 13 
 
 
 
 
 
 
 
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CHAPTER FIVE 
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 
5.1 Introduction  
This section presents the “summary, conclusions and recommendations for the study”. 
5.2 Summary  
The study was conducted on “the effect of macroeconomic”c variables on gold prices in Ghana. 
The study specifically looked at the impact of “exchange rate on gold prices, impact of crude oil 
prices on” gold prices, “impact of interest rate on the gold price, impact of inflation on the gold 
prices”. The study made use “of the time series approach, using the Augmented Dickey Fuller” 
test of cointegration, Johanson cointegration test, and the “Auto Regressive Distributed Lag 
model for the long and the short-run relationships”. The study sought to investigate the effect of 
Macroeconomic variables on Gold prices in Ghana. The researcher used the time series analysis 
approach in analysing the data. The key findings are presented below; 
The study performed a test of stationarity among variables using the ADF test and the “results 
indicated that all the variables are integrated of order one”, that is I(1). This resulted into the use 
of “Johnson Cointegration, and the results showed the existence of” cointegration and hence the 
use of the “Autoregressive Distributed Lag Model” in investigating the long and short run 
relationships of the independent variables on economic growth. The Cointegration test results from 
the Johanson cointegration analysis indicated the null hypothesis (rank 0) of no rank is “rejected 
at 1 percent significant level” both at the trace statistics and maximum statistics, therefore 
“existence of cointegration among the variables and hence a long run equilibrium among the 
variables in the study”. 
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The study has shown that Exchange rate (EXR) significantly affect Gold prices negatively in the 
long run. Crude oil prices also negatively and insignificantly affected Gold prices in the long run. 
The study also revealed that inflation has no effects on Gold prices in the long run. However there 
is a positive and “insignificant relationship between Interest rate and Gold prices in the long run”.   
The study has revealed that Exchange rate in the short run insignificantly and positively affects 
Gold prices. The current value of Crude oil prices “was found to affect Gold prices positively in 
the” short-run. The two immediate lagged values of Crude oil prices was also “found to have a 
positive and significant effect on Gold prices in the short run”. The third “lagged value of Crude 
oil prices has no significant effect on” Gold prices in the short run. The current inflation negatively 
and insignificantly affected Gold prices. The three immediate lagged values of inflation did not 
significantly affect “Gold prices in the short run”. The error term of the error correction model has 
also shown the tendency of the economy to automatically adjust “to equilibrium in the long run” 
with regards to occurrence of “short run shocks”. 
5.3 Conclusions 
The study has shown that Exchange rate significantly “affect Gold prices in the long run”.  Crude 
oil prices, Inflation and Interest rate did not significantly affect economic growth in the long run.  
The also concludes that Crude oil prices and its immediate two lagged values in the short run 
significantly and positively affects Gold prices.  Exchange rate, the third lagged value of Crude oil 
prices, Inflation and its three lagged values, “and interest rate did not significantly affect Gold 
prices in the short run”. The model has a the tendency of the economy to automatically adjust “to 
equilibrium in the long run” with regards to occurrence of “short run shocks”. 
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5.4 Recommendations 
Since the study found a “negative relationship between” Exchange rate “and Gold prices in the 
long run”, it is recommended that the government of Ghana should take advantage of the outcome 
so as to fix and fight the black market and control the inflationary rate in the economy. 
“It is also recommended that investors of gold take advantage of the” results from the study to 
“their investment strategies by considering both the external environment and as well the internal 
environment of the” country. There is a situation that shows that when the rate of interest rises it 
likely to results to a rebound in real prices of gold. It is also noted that investors who hold long 
positions in commodities have that expectations for improvement in inflation and exchange rate. 
The results from the study will guide investors of gold in Ghana to consider more on the variables 
that influences gold prices, especially changes in exchange rate as was “found to be statistically 
significant in the long run”. 
The study also highlighted the effect of “some selected macro-economic variables” on Gold prices 
in Ghana, future studies could incorporate some other variables that are related to the 
macroeconomic “factors that affect Gold prices such as Stock index and Growth rate”. This will 
give Gold investors the ability to forecast gold prices and earnings in the future. 
 
 
 
 
 
 
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