Why gold trading is gaining popularity among Kenyan investors
Sponsored by HF Markets
Gold trading has experienced a huge surge in popularity among Kenyan investors. This growing interest can be attributed to a combination of economic factors, including increased accessibility and the intrinsic qualities of gold as a financial asset.
Economic uncertainty and inflation hedge
Gold trading has long been regarded as a safe-haven during times of economic instability and geopolitical turmoil. As global financial markets face volatility due to factors such as geopolitical tensions, inflationary pressures, and currency fluctuations, Kenyan investors are increasingly turning to gold to preserve their wealth.
The precious metal’s ability to maintain its value over time makes it an effective hedge against inflation and currency depreciation. Importantly, Kenya’s gold exports have seen substantial growth, reaching $191 million, driven by rising global prices and increased local production.
Diversification and portfolio stability
Incorporating gold trading into an investment portfolio offers diversification benefits, reducing overall risk exposure. Gold’s low correlation with other asset classes, such as stocks and bonds, means it often performs well when traditional markets underperform.
This characteristic is particularly appealing to Kenyan investors seeking to balance their portfolios and mitigate potential losses during market downturns. The World Bank points to gold’s role in capital preservation and its performance during financial crises, which indicates its value in a diversified investment strategy.
Increased accessibility through financial instruments
The introduction and growth of financial instruments like Exchange-Traded Funds (ETFs) have made gold trading more accessible to Kenyan investors.
The Nairobi Securities Exchange (NSE) listed its first ETF, the NewGold ETF, in 2017, allowing investors to gain exposure to gold without the complexities of owning physical bullion.
This ETF has shown strong performance, reflecting global gold price trends and attracting both institutional and retail investors. The Capital Markets Authority (CMA) reported an 18 percent growth in assets under management for ETFs in Kenya, which indicates a rising appetite for these investment vehicles.
Technological advancements and digital platforms
Advancements in technology and the proliferation of digital trading platforms have further facilitated gold trading in Kenya. Investors can now buy and sell gold or gold-backed securities online, which increases convenience and broadening market participation.
This digital shift aligns with global trends where increased accessibility through ETFs, physical bullion, and digital platforms has made gold investing more convenient.
Government regulations and market formalisation
The Kenyan government’s efforts to formalise the gold market have also contributed to its growing appeal. The Mining Act of 2016 introduced measures to regulate exploration, mining, and trading of minerals, including gold.
These regulations aim to increase transparency, reduce illegal mining activities, and boost revenues from the gold industry, thereby creating a more secure environment for investors.
Challenges and considerations
Despite the opportunities, investors should be aware of challenges in the Kenyan gold market. Gold scams have been reported, with fraudsters exploiting unsuspecting buyers.
It’s essential for investors to conduct thorough due diligence, verify seller credentials, and engage legal experts to navigate transactions safely.
Conclusion
The increasing popularity of gold trading among Kenyan investors is driven by its role as a hedge against economic uncertainty, bolstered by supportive government regulations. As the market continues to evolve, investors are advised to stay informed and leverage professional guidance to navigate the world of gold trading effectively.