Gold prices at the Nairobi Securities Exchange (NSE) fell further on Monday as the reversal of a record-breaking rally continued into the new week amid the fall in the value of the precious metal globally.
The gold exchange-traded funds (ETFs) fell to Sh5, 845 on Monday from Sh6,235 on Friday and a record high of Sh6,600 on Thursday.
This follows a drop in gold and silver prices in the global markets in declines that 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.
Mr Warsh historically has been more concerned with higher inflation than slower growth, soothing Wall Street fears that the Fed would succumb to Mr Trump’s push to lower interest rates. Gold extended its fall on Monday to $4,677.17 per ounce after scaling a record high of $5,594.82 on Thursday.
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. Its price at the NSE had nearly doubled from Sh3,165 at the start of January last year to Thursday’s peak, rivalling the performance of some of the NSE’s top-returning blue chip equities.
When it was introduced into the Kenyan market in March 2017, the ETF offered investors at the Nairobi bourse 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 safe haven option in times of turbulence.
Before its introduction, Kenyan investors wishing to participate in the gold market had to either trade in the commodity in its physical form (bullion) or through offshore markets, which came with higher risk and costs.
Holding bullion or other gold assets, such as coins or jewelry, also came with linked barriers like the need for storage (security), a lengthy process of buying and selling and risk of fraud (fake gold).
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.
For months, a gravity-defying rally had pushed gold and silver prices to all-time highs, enticing speculators and sparking fears that investors the world over were losing faith in traditional currencies like the dollar.
Starting Thursday night, the air finally came out, translating to falls in the price of gold ETF at the Nairobi bourse.
After Mr Trump confirmed Mr Warsh’s pick Friday morning, the dollar posted its strongest day in months.
The speed of subsequent declines in precious metals markets stretching from central banks to underground vaults to Wall Street trading desks caught investors off guard.
At the NSE, trading in the gold ETF also picked up as it rallied. About 2, 874 units of the gold ETF were traded in the first week of January before peaking at 73, 765 units last week.
The rally of the precious metal left NSE gold investors with a more than fivefold gain or 420 percent from the ETF’s listing price of Sh1,205.16 per unit in March of 2017. It delivered a return of 22 percent since the start of the year to last week, only trailing gains by the Kenya Airways stock.
The Absa New Gold ETF has lost some of the gains since Friday, with returns falling to 8.2 percent between yesterday and the start of the year
Absa deems its gold ETF as one of the simplest and least costly for investors, with the units sold fully backed by physical holdings of the metal or gold bullion at a custodian bank- the ICBC Standard Bank.
The demand for the ETF in the wake of its 2017 listing was muted and went for days without a single trade, with owners preferring to hold onto the asset because of its strength in hedging against inflation.
Absa Bank Kenya and the Central Depository and Settlement Corporation (CDSC) can provide additional units to the market should demand surpass the 400,000 listed pieces.
“The New Gold ETF is not limited in terms of liquidity. Whatever we are holding currently can be increased by simply making an order, which is processed within three to five working days by Absa and the CDSC, ensuring there are as many gold units as demanded,” Tito Namu, a senior equities dealer at Absa Securities Limited, told the Business Daily in a previous interview.
Analysts expected the price of gold to rally despite the wild swings amid geopolitical threats, falling interest rates, and a de-dollarisation.
“Positive drivers of gold remain in place, in our view. Major central banks and investors continue to search for USD alternatives -- a diversification demand that has yet to run its course,” Standard Chartered Bank says in its 2026 outlook report.
“In addition, recent data suggests gold’s inverse relationship with bond yields is starting to re-establish itself, adding another tailwind for the precious metal. Finally, our expectation of a weak USD should also add support.”
Data from the World Gold Council shows that central banks’ gold purchases are outpacing historical norms, fuelling the gold bullion demand and price rally.
