Middle East conflict lifts NSE gold prices to new high


The price of gold exchange-traded funds at the Nairobi Securities Exchange (NSE) has jumped to a new historical high of Sh2,840.

Photo credit: SHUTTERSTOCK

The price of gold exchange-traded funds at the Nairobi Securities Exchange (NSE) has jumped to a new historical high of Sh2,840 on the emergence of new geo-political tensions.

Absa New Gold ETF unit price rose from Sh2,530 on Thursday last week, mirroring the lift seen in the international gold prices market where the gold spot price has reached highs last seen at the start of the Russia-Ukraine war in early 2022.

The rise in gold prices is attributable to investors opting for safer haven investments beyond government securities such as US Treasuries as the chance of an escalation of conflict to the wider Middle East is priced in.

Given gold is the underlying asset in the trading of the gold ETF, gold prices at the NSE have risen in tandem.

“From my vantage point, I see the uptick in Absa Gold Price as a response to movements in the gold commodity that’s pricing in the compounded geopolitical risks on the developments in the Middle East. The uptick in price is in response to a likely rise in demand and the ETF adjusting to gold trends,” Wesley Manambo, an analyst at Standard Investment Bank told the Business Daily.

“When faced with such (geopolitical tensions), investors often run to preserve purchasing power because of the ripple effects involved including disruptions in supply chain and stubborn high freight fees.”

Investors at the NSE are able to buy listed gold debentures which each equate to 0.01 of an ounce of gold via the ETF.

Globally, spot gold traded at $1,982.96 (Sh297,000) per ounce on Friday.

Absa New Gold ETF is largely a lower turnover counter, pointing to investors holding onto the assets in contrast to selloffs seen in both equities and bond markets.

With the price of the ETF being based on the prevailing price of gold, this has meant that investors in the debentures can realize price gains without trading.

The ETF was first listed on the Johannesburg Stock Exchange in 2004 before secondary listing in markets including Botswana, Nigeria, Mauritius, Namibia and Ghana.

Trading of the debentures at the NSE commenced in 2017 when the then Barclays New Gold ETF floated 400,000 units at a price of Sh1,205.16 each.

As of May 2023, the ETF was majority-owned by foreigners at 89.88 percent representing the ownership of 280,600 units.

In contrast, Local individuals and institutional investors hold a partly 3.68 and 6.44 percent of the ETF.

The last notable surge in the price of the gold debentures happened in March as bank troubles relating to the collapse of the Silicon Valley Bank in the US and crisis at Swiss lender Credit Suisse which rekindled fears of a new global banking crisis.

Gold is widely considered a hedge against economic uncertainties.