NSE gold fund hits Sh92m trade on flight to safetyFriday March 04 2022
Investors purchased gold-backed exchange traded fund (ETF) worth Sh91.7 million on Wednesday as they moved to hedge against volatility in global markets.
They shifted 44,200 units of the Absa New Gold ETF at an average price of Sh2,075, realising the highest traded volume and value in a single day on the counter since the units were listed on the Nairobi Securities Exchange (NSE) #ticker:NSE in March 2017.
All trades on the counter on Wednesday were carried out by foreign investors, mirroring the trend elsewhere in global markets where they are shedding risky equities and turning to safe-haven bets such as gold, the dollar, US bonds, and the Swiss Franc due to jitters following Russia’s invasion of Ukraine.
Wednesday’s activity was only the second time the ETF has traded this year, with its price approaching the all-time peak of Sh2,100 recorded in December 2020.
“Globally, gold has emerged as one of the most reliable safe havens of wealth, remaining largely unchanged in the long run despite the short-term market volatilities. Gold can be used to hedge against inflation, deflation and currency risk,” said NSE chief executive Geoffrey Odundo.
The metal was trading at a 16-month high of $1,931 (Sh219,922) per troy ounce (31.1 grammes) yesterday, having gained seven percent in the last one month.
The price of the ETF at the Nairobi bourse is derived from real-time value of gold in the world markets, meaning that any further appreciation in the global price of the metal will push the fund to a new high in price.
Analysts expect the price of gold to rise further in coming days if Russia and Ukraine don’t agree a ceasefire in the ongoing conflict, which has also raised oil prices to an eight year high of $115.60 per barrel on Thursday.
“At the moment, it's looking like a case of when it (gold) will hit $2,000 rather than if but a sudden and unexpected ceasefire would surely change that,” said Craig Erlam, a senior market analyst at global forex firm OANDA.
Since its listing at the NSE, the ETF has largely traded thinly but has seen spikes in demand whenever there is volatility in global markets.
The peak was seen in 2020 when it moved 152,400 units —up from 2,600 in 2019— at a time when equities were volatile and shedding value due to the Covid-19 prevention restrictions in place around the world.
Last year, the volume fell by half to 75,800 units as markets recovered and flight to gold’s safety eased.