The coronavirus pandemic has seen investors run to safe-haven assets such as Gold that has seen the price of gold increase 30 per cent since the start of the year to date. Traditional assets remain battered by the restriction on movement and the rampant lockdowns across major markets. Gold will remain in demand due to prevailing conditions such as weakening of the dollar, the spread of COVID19, and the US-China tensions.
There is huge investor appetite for alternative assets as the pandemic is forcing market insiders to rethink their strategies and options. In light of this, Absa Bank Kenya teamed up with Nairobi Securities Exchange (NSE) to host an online webinar breaking down and demystifying the New Gold ETF and ways Kenyan investors can benefit from the ‘Gold rush’.
Breaking it down
Michael Mgwaba, CEO NewGold Issuer (RF) Limited, says that an electronic-traded fund (ETF) is a fund listed on the stock exchange that is meant to give investors exposure to equities and commodities. In the case of New Gold, this is an ETF tracking the spot price of gold so investors can have ownership into gold.
Since listing in 2004, the Gold ETF has provided investors with an alternative investment asset especially during the 2008 crisis. Kenyan investors can benefit from having an exposure to gold in their portfolio which helps diversify their assets and provide long term returns.
Gold is the best performing asset class in the market now and has been increasing by about 10 per cent each year since 1971, adds Mgwaba.
Geoffrey Odundo, the CEO of the Nairobi Securities Exchange said that the Gold ETF is regulated by the Capital Markets Authority. The underlying asset is gold bullion stored in vaults in London thus has lower volatility. He lauds gold as a stable asset whose value drivers are intrinsic to the economy.
He says that the product has been attractive because it is professionally managed as ABSA provides periodic information on its performance. In the last one year, the Gold ETF has gained traction with Odundo saying that the asset class will continue to appreciate in the year and deliver better returns.
Therefore, New Gold ETF can provide Kenyan investors with long term returns. It is based on the Kenya shilling equivalent of the prevailing international market price of Gold in USD. In 2017, the Gold ETF was valued at Ksh1,150 and has appreciated 82 percent to hit an all time high of Ksh2100. In the current year, the GOLD ETF has appreciated 42.8 percent.
Kenya became the seventh market within ABSA group to launch the Gold ETF in 2017 after, Namibia, Nigeria, Ghana, Mauritius, and South Africa. ABSA Gold ETF is valued at $1.4 billion and is the largest Gold ETF in Africa.