As Global Dollar-Induced Economy wanes, experts point to Gold as safe alternative for investors


As the global economy recession worsen due to the dependence on the green back currency that’s been unable to contain the effects on the Covid-19 pandemic.

Experts are beginning to point investors to see Gold as alternative investment to the US Dollar.

Some are openly asking, once again, whether US institutions are now too weak for the world to rely on the dollar.

In recent webinar on Gold ETFs in Nigeria

Experts, who spoke at a webinar on “Using alternative investments classes to navigate uncertain times”, hosted by the Nigerian Stock Exchange (NSE), in partnership with ABSA Securities Nigeria, said gold represents viable option for investors who are more than ever looking for newer investment options that can provide the much-needed diversity to their portfolios.

The webinar focused on the value of gold as a viable investment option and the ease of access that the NewGold Exchange Traded Fund (ETF), which is listed on the NSE, provides for investors who are ready to take advantage of the opportunity.

NSE, had in December 2011, listed the NewGold ETF and has since grown to become Africa’s second largest market for ETFs with market capitalisation of about N7 billion.

Head, Trading Business Division, Nigerian Stock Exchange, Mr. Jude Chiemeka said the NSE as a multi-asset class hub, recognises opportunities in the alternative investment asset space for the Nigerian capital market and it has been working assiduously with stakeholders to provide more insight into these instruments.

He noted that gold, which is categorised under the commodities segment of alternative investment classes, has historically been recognised as a safe haven asset used to provide stability to portfolios in times of market uncertainty.

He said the Exchange was delighted with the partnership with ABSA and the opportunity to demystify investing in gold from a fundamental and trading perspective.

He assured that the NSE will continue to provide avenues for engagement on its various products and service to enhance investors’ knowledge and deepen capital market activity even in these challenging times.

Head, Exchange Traded Products (ETP) Business, ABSA Regional Operations, Mr. Michael Mgawaba, explained that gold is not only defensive, but can also be used for risk management while delivering impressive results.

“What distinguishes gold is its performance during crises. It has been known to have a negative correlation with economic crisis which means that in an economic downturn, when other investment classes are going down, gold tends to go up,” Mgawaba said.

He noted that investing in gold is now easier than ever with the NewGold ETF that is listed on the NSE.

Speaking to the modalities of investing in NewGold ETF, Managing Director, ABSA Securities Nigeria, Mr. Akinkunmi Majaro explained that an investment in the NewGold ETF is simply an investment in gold, but in electronic form.

“It trades like any other security with no buying or selling restrictions and has returned 29 per cent year-to-date, 31.75 per cent in 2019 and over 131 per cent since its listing in 2011. Furthermore, because it is an open-ended instrument, new units can always be created to satisfy demand,” Majaro said.

According to him, investors looking for an instrument that offers safety and liquidity should begin to look more closely at gold and the NewGold ETF.

Senior Research Analyst, FXTM, Lukman Otunuga, noted that Gold hit a record high of $1,983 a troy ounce this week not seen in more than seven years, as United States’ economic stimulus weakens US Dollar global dependence amid fears of global recession and stimulus

According to him, the precious metal remains in fashion, appreciating almost 13 per cent since the start of the year.

“Further gains may be on the cards this week if corporate earnings paint a gloomy picture and the Dollar weakens on disappointing data. Looking at the technical picture, prices could jump higher towards $1,730 if a solid weekly close above $1,700 is achieved.

Alternatively, sustained weakness below may pave open the doors back towards $1,675,” Otunuga said.

ETFs are professionally managed vehicles designed to give investors broad exposure to the market by tracking an index or specialised themes that consider factors such as value and growth investing.

The ever-growing investment vehicle gives institutional and individual investors access to a wide range of asset classes such as stocks, bonds, commodities, real estate and investment themes, including Shariah investing, sector bias, dividend yield and more.

Exchange Traded Funds (ETFs) are securities that track the performance of an index or basket of assets. They are listed on an exchange and traded much like stocks.

ETFs derive their performance from the index or underlying assets they track. ETFs provide investors with the opportunity to diversify their investments and gain exposure to various investment strategies and asset classes, including;
​​Local Fixed Income
Local Equities
International Markets
With ETFs, investment professionals can track global, country-specific and asset-specific indices. ​

The Nigerian Stock Exchange (NSE) is the leading ETF markets in the West African region in terms of number of listing, turnover value and capitalization. ​NSE offers a fully electronic trading platform that delivers the benefits of deep liquidity, transparency and tremendous speed and efficiency.

​The first ETF listed on The Nigerian Stock Exchange’s ETF Board in December 2011 was a commodity ETF. Since then, a number of equity-based and Fixed Income ETFs have been introduced to the Nigerian bourse.

ETFs can be purchased on the NSE just like stocks and bonds through dealing member firms as well as online trading platforms. NSE offers a fully electronic trading platform that delivers the benefits of transparency, tremendous speed and efficiency

Who are ETFs for?​
​​​Investors who are looking for benchmark return at a minimal cost
Investment professionals seeking efficient access to other markets and asset classes.
Passive investors who may not have time to actively monitor the market
Investors looking for diversification through a single security

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