Barclays Bank gold stock up 23pc, but few takers

What you need to know:

Barclays Bank gold stock has gained 23.6 percent in the year to date despite being one of the most dormant counters at the Nairobi bourse.
The share price has rallied on rise in the global prices of gold, underlying NewGold which topped $1,500 in August, 2019, for the first time in over six years.
A Financial Times report estimated that investors bought almost $5 billion in gold due to the rising political and economic risks. In addition, gold was one of the best performing assets in August rising eight per cent, reaching its highest level since February 2013.

Barclays Bank gold stock has gained 23.6 percent in the year to date despite being one of the most dormant counters at the Nairobi bourse.

The share price has rallied on rise in the global prices of gold, underlying NewGold which topped $1,500 in August, 2019, for the first time in over six years.

A Financial Times report estimated that investors bought almost $5 billion in gold due to the rising political and economic risks. In addition, gold was one of the best performing assets in August rising eight per cent, reaching its highest level since February 2013.

“This performance in NewGold is attributable to the rally in the underlying gold prices, driven by demand as a safe-haven asset amid growing concerns about a slowdown in the global economy,” Barclays said.

The Exchange Traded Fund was part of the market strategy to diversify options for investors from equities and bonds but Kenyan investors have not embraced new products including the ETF, Asset Backed Securities (ABS), derivatives, and securities lending.

Securities market has been hit by a protracted bear run while the bond market has fizzled out on defaults, leaving government securities as the only option to put money.

Despite the shine on the counter, Kenyans have kept away from the gold launched in 2017 and with a market capitalisation of Sh576 million.

NewGold ETF is trading at Sh1,440 and despite being a safe asset globally, it has not attracted Kenyans seeking to guard their investment from a decline in stock prices, and correction on real estate investments that have seen prices decline.

In the year to date, the Nairobi All Share Index (NASI) has gained 3.2 percent while the benchmark Nairobi securities Exchange 20 share index has declined 13.8 percent and NSE 25 is down 2.2 percent.

The Kenya Bankers Association Housing Price Index report indicated a depressed housing market during the second quarter of 2019 after declined for the second consecutive quarter by 1.72 percent in Q2 2019 compared to a decline of 2.78 per cent during the previous quarter.

Kenya became the seventh market within the Barclays Africa Group (now Absa Group) to launch product, valued at approximately $1.1 billion.

It is the largest Gold ETF in Africa and the eighth largest in the world.