Gold prices have declined on the floor of the Nigerian Stock Exchange (NSE), as investors bet on equities.
The New Gold Exchange Traded Fund (ETF) is up 0.54 percent year-to-date (YTD), under-performing the Nigerian Stock Exchange All Share Index (NSEASI) which is up 5.95 percent for the same period.
The ETF of ABSA Capital Limited and Vetiva Capital Limited had its 400,000 units listed on the NSE on December 19, 2011 at N2,526 per unit and closed at N2,525 per unit on Monday.
Meristem Securities’ analysts, in a recent research, noted that the financial crisis of previous years have made gold a safe haven in many developed markets.
“Hence, ETFs with gold as underlying asset performed considerably well. For instance, Gold ETF in South Africa had one year annualised returns of 41.60 percent,” they said.
Analysts said due to lack of familiarity with Gold in Nigeria, most investors prefer to deal in equities instead.
“Our understanding is that the interest in the New Gold ETF is quite low at the moment as investors are still trying to familiarise themselves with the benefits and structure of the product,” said Jide Allo, analyst with Stanbic IBTC Bank.
While the ASI index is up 5.95 percent year-to-date (YTD), a sector like the banking index is at 12.1 percent at the same period.
Global commodity prices, including gold, have recently depreciated, which also affected the current pricing of the ETF.
Gold futures for August delivery retreated 0.1 percent to settle at $1,564.20 an ounce at 2p.m. in New York. Gold futures fell in New York, the longest monthly slump since 2000, as Europe’s worsening debt crisis and signs of a United States economic slowdown crimped demand for the precious metal.
Gold prices fell 9.4 percent from its all time high of $1,788 an ounce reached in early March 2012.
Meanwhile, the Head of Research with Afrinvest West Africa, Kayode Tinuoye said it was too early to judge the performance of the New Gold ETF because it had been traded for less than 5 months since listing.
“Typically, newly listed stocks tend to trend up in the first few months of their listing, pending when the market fully digests their fundamentals and effects a correction,” he said.
“I think as the market comes to terms with the New Gold ETFs fundamentals, especially as an effective hedge against inflation, we will begin to see more activities.”
The Nigerian listed New Gold ETF has traded 78 days out of the possible 108 trading days since it was listed, with an average daily trade of N2.5 million ($15,800).
