Nigerian gold falls to N176K/g after US stock market bloodbath

Nigeria’s local gold market briefly fell at the last trading session of the week as 24-karat gold settled near N176, 000 per gram.

The sell-off was net negative for local investors and jewellers, who’ve had to contend with turmoil in overseas equity markets.

Metal traders reassess staple safe-haven instruments as sentiment shifts away from risky US equities and the macroeconomic environment evolves.

Those ‘bloodbaths’ in global stock markets are likely going to force institutional investors to sell gold to meet margin calls when they de-leverage, as their risky equity holdings are losing money. Gold then draws in capital to avoid risky share markets.

Nigeria’s institutional investors and Nigeria’s affluent women often hedge with spot gold to protect themselves from systemic inflation and naira devaluation. However, a stable Naira exchange rate (roughly -N1,350/$) has also weakened gold prices in Nigeria compared to past years.

Nigerian gold prices are now a mirror of the international spot gold market (XAU/USD). If the global spot price consolidates or retraces, local prices will do the same without being hidden behind the currency losses.

The precious metal fell on Friday after a ‘blowout’ US employment report dashed expectations and set the stage for a Federal Reserve rate hike in December.

Adding to the positive economic environment, the University of Michigan Consumer Sentiment Index for November rose to 51 from 48. The one-year inflation forecast declined to 4.3% from 4.7%, indicating that consumers are optimistic about the economy despite recent energy price fluctuations.

The strong data sent the US Dollar Index (DXY), which compares the greenback’s strength to a basket of six major currencies, up 0.62% to a level above 102 points.

Markets also adjusted rate hike expectations after the employment figures. The probability of a Fed rate increase by December, as implied by the CME Fed Watch Tool, rose to 77% from 67% on Thursday.

St. Louis Fed President Alberto Musalem said that while “people remain concerned about inflation at the current level,” the longer-term outlook for inflation expectations is well-anchored. He said the heightened price pressures are due to energy shocks and the buildout of AI infrastructure.

Although macroeconomic figures pressured bullion, interest in safe-haven assets remained amid continued geopolitical tensions in the Middle East. US and Iran are still negotiating, and there are continued indications that a breakthrough could be imminent.

Nonetheless, security conditions remain serious amid new reports of Houthi attacks on Saudi Arabia and assessments that Tehran is preparing for a military response. Middle Eastern sources, quoting Israeli media, also reported that the US is likely to launch a targeted attack to compel Iran to sign a better deal.

Gold traders are now turning their attention to next week’s US Consumer Price Index (CPI) as the next conclusive indicator of US inflation and Federal Reserve policy having relinquished its highs after the jobs to surprise.

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