Gold prices at the Nairobi Securities Exchange (NSE) rose on Monday as precious metal rates globally jumped on investor jitters over renewed volatility following the US-Israel strikes on Iran that has sucked in countries in the Middle East.
The Gold exchange-traded funds (ETFs) rose to Sh6,555 per unit yesterday from Sh6,230 on Friday, resuming a yearlong rally that had peaked last month.
The exchange-traded fund had reached a record high of Sh6,800 last month before correcting downwards.
The declines began around the time reports suggested that US President Donald Trump would nominate former Federal Reserve governor Kevin Warsh to succeed Jerome Powell as chair of the central bank.
Analysts see the renewed rally as a flight to safety pivot as the conflict between the US and Iran threatens fresh economic instability, affecting riskier asset classes like equities and disrupting shipping, logistics and global supply chains.
Gold prices rose by more than 2.4 percent to over $5,400 an ounce (Sh696,708) as investors sought haven assets.
On the NSE, the ETF price is determined by the global gold prices and dollar rate, with the strengthening of the US currency having the effect of increasing the metal’s price.
Investors at the Nairobi bourse can buy the listed 400,000 gold bullion debentures, each equivalent to 0.01 of an ounce of gold or 0.28 grams.
Given the price of the ETF is based on the underlying asset, the prevailing price of gold, this has meant investors in the asset have realised price gains without the need for trading.
“I think you’re going to see a knee-jerk spike in most commodity markets, including gold and oil. This will be a natural response to the outbreak of hostilities, which was rather unexpected in terms of scale and scope,” Edward Meir, an analyst at Marex, was quoted saying by the Reuters news agency.
The price of the Absa New Gold ETF is determined by the global gold prices and dollar rate where the strengthening of the US currency also has an effect in increasing the metal’s price.
About 1,750 units of the fund changed hands in Monday’s trading.
The modest price jump went against the marginal 0.73 points drop in the Nairobi All Share Index (NASI) as local equities remained largely untouched by the renewed global jitters which began over the weekend.
The price of gold at the NSE has nearly doubled from Sh3,615 at the start of January last year, rivalling the performance of some of the NSE’s top-returning blue-chip counters like Safaricom and KCB.
The gold ETF was introduced in March 2017 and offered Kenyan investors local access to gold as an investment asset for the first time, while also providing the market with an alternative to the dollar as a haven option in times of turbulence.
Kenyan investors previously had to trade gold in its physical form (bullion) or through offshore markets, which came with higher risk and costs.
The NewGold ETF or Absa’s gold-backed exchange-traded fund was first listed on the Johannesburg bourse in 2004, but it has since had secondary listings in other African exchanges, including Botswana, Nigeria, Mauritius, Namibia and Ghana.
