In a market shaken by increasing uncertainty, one commodity has stood out: gold. Year to date the precious metal has surged over 15% to over $3000 per ounce. As the price skyrockets, more and more people are trying to get in on the action. In Ghana the surge has caused a gold mining boom.
But this gold rush is having detrimental effects on another commodity, cocoa. Ghana is the world’s second largest producer of the vital chocolate ingredient, and with locals pivoting towards gold, the two commodities are now competing for land, labour, and resources.
We’re examining the origins of this commodity conflict, its environmental and societal impact, and the broader ramifications for global cocoa markets as well as day-to-day consumers. It’s a tale of economics, changing incentives, and intertwining relationships. Let’s get started.
The Gold Boom in Ghana
For decades gold has been perceived as a ‘safe haven asset’, particularly during times of economic uncertainty. As inflation pressures rise and global markets wobble, investors are once again turning to gold, causing bullion to hit record highs. In Ghana, this surge has caused mining activities to rapidly increase, particularly among young people. With limited job availability and inflation increasing the cost of living, many Ghanaians are turning to illegal mining, known as galamsey, risking being prosecuted in order to earn enough money to survive and provide for those around them.
Even some farmers are pivoting to mining. Rather than waiting months for inconsistent harvests and dismal returns, farmers are leasing their land to miners or even digging up the ground themselves, hoping to make a quick buck. Gold’s meteoric rise in price has reshaped financial incentives on the ground in Ghana, altering land use and livelihoods in one of Africa’s agricultural powerhouses.
How Cocoa is Being Squeezed Out
Things haven’t been so sweet in the cocoa market as of late, and before looking at the impact gold mining is having on the crop, we first need to look at the other factors that are reducing yields.
Climate change has brought more unpredictable weather patterns and rainfall in Africa, damaging cocoa crops during harvest and reducing yields. Additionally, chronic underinvestment in Ghana’s cocoa sector has left many trees ageing and modern farming techniques underused, leading to lower harvests. Topping it off, diseases have run riot through cocoa fields, and with older trees not able to combat these diseases, outputs have plummeted further.
Increased gold mining is the latest thing adding pressure to this storm of dropping yields. Many cocoa farms are being abandoned or cleared altogether and instead used for mining operations. Fanning the flames is Cocobod, Ghana’s state-run cocoa board, which enforces a fixed pricing system intended to protect farmers from market volatility. However, in practice this is preventing farmers from selling their crops at the current market price, meaning they are seeing no upside from the global rise in cocoa prices. This has further reduced any incentive for Ghanaians to farm cocoa, redirecting labour and land into gold mining.
These environmental challenges, pricing rigidities, and shifting incentives are combining to squeeze Ghana’s output of cocoa, reducing the global supply. This has contributed to the steep rise in cocoa prices as concerns over the long-term availability of the crop creep up.
Gold’s Enviromental Footprint
One of the biggest concerns arising from this Ghanaian gold rush is the lasting environmental and social impact it is having.
Illegal mining involves excavating land and flooding it with water contaminated by chemicals like mercury and cyanide. This is detrimental for the environment, as not only does it make the land completely unusable for farming, but it also pollutes local water supplies. This situation has become so severe that Ghana is now projected to need to import water by 2030.
Alongside this, the movement of young people into mining will have a long-term social impact on rural communities, as it breaks the chain of agricultural knowledge being passed down. This means that should the price of gold fall, young people will struggle to pivot back to farming, as they’ll lack the knowledge and skill set to do so.
The long-term nature of these impacts is extremely concerning for global cocoa supply, as both the land and the skill sets needed for cocoa production are being eradicated.
The Ripple Effect Across Global Markets
So how has this relationship between gold and cocoa affected global markets? The supply shortage of cocoa is starting to hit. With production falling, global cocoa prices have reached record highs in recent months, prompting responses from chocolate manufacturers. As a consumer, you may have noticed your favourite chocolate goods becoming more expensive, smaller, or less ‘chocolatey’, a result of manufacturers trying to use as little cocoa as possible.
Rising prices in the cocoa market have also caught the attention of traders. Institutional investors have piled into cocoa trades as the supply has tightened, hoping to profit from price rises as supply falls. Once considered relatively stable, cocoa is now acting more like a high-risk asset, with increased daily volatility creating both opportunities and uncertainty.
This situation is a striking example of how interconnected assets can be, even when they are seemingly unrelated. The current relationship between gold and cocoa in Ghana shows how a shift in one asset class can ripple through others, disrupting markets, supply chains, and consumer goods.
Interconnectedness: The Bigger Picture
The Ghanaian gold rush and its impact on cocoa isn’t just a local story; it is a textbook example of how global markets and politics are deeply interconnected. We are witnessing a simple domino effect.
New U.S. economic conditions (Trump tariffs, FED sentiment shifts) embedded fears of a global trade war and U.S. recession, pushing investors towards ‘safe haven’ assets like gold.
Rising demand spiked gold prices, spurring increased mining activity in Ghana. This diverted resources away from cocoa production, hurting an already struggling cocoa supply. This contributed to spiking cocoa prices, ultimately making chocolate more expensive for consumers.
This knock-on effect acts as a clear reminder that markets don’t operate in silos. In a global economy, local choices become global consequences.
From an outside perspective, gold and cocoa might seem completely unrelated, but in global markets, no asset exists in a vacuum.
As investors, analysts, and consumers, we often focus on markets one at a time. However, this story shows that often the smartest insights lie somewhere in the grey. If cocoa can get turned on its head by gold, what other hidden correlations lie in the markets we think we know?
