Gold boom beckons Nigeria as analysts predict bullish global market prices

ONOME AMUGE 

For a country seeking to revitalise its economy, Nigeria may have struck gold, quite literally. Amid the precious metal market’s continuous upward climb, driven by gold’s capacity to weather geopolitical and economic storms, Nigeria stands at a unique crossroads, where the precious metal’s reliability as a safe haven and its role as an engine of diversification offer a promising solution to its ailing economy.

The recent surge in the price of gold, driven by the U.S. Federal Reserve’s decision to cut interest rates has seen the precious metal soar by four percent. 

However, market experts predict that this upward trajectory is only just beginning, with the safe haven asset poised for further gains.

The consensus among analysts is that the conditions for gold’s ascent are firmly in place, given the ongoing global economic uncertainty, volatility in equities markets, and the possibility of further rate cuts from central banks.

In these times of economic volatility, gold has emerged as a beacon of stability and a trusted ally for investors. As people seek out safe havens for their wealth, gold has proven to be a formidable fortress, with its value soaring to unprecedented heights.

September saw the precious metal hit a new high of over $2,600 per ounce, setting yet another record and cementing gold’s position as a reliable hedge against inflation, geopolitical uncertainties, and other unpredictable forces at work in today’s economy.

With gold on a seemingly unstoppable ascent, technical indicators point to the possibility of an even stronger rally in the near future. One such indicator is the “inside bar”, a price compression pattern that often heralds a major move in the market.

Gold Predictors, a web-based application that offers free and premium articles and trading signals for educational purposes, has recently identified this technical setup in gold, suggesting that the precious metal could be gearing up for even more explosive price action.

The inside bar formation, when encountered in the context of an overall uptrend, as is currently the case with gold, often signals that a significant breakout move is on the horizon.

Given the geopolitical tensions flaring in the Middle East and other parts of the world, investors have flocked to the perceived safety of gold, driving its price upward.

With gold’s upward trajectory showing no signs of slowing, analysts are predicting further gains in the coming month, with some estimates pointing towards a potential price range of $2,600 to $2,800 per ounce.

Henry Yoshida, a certified financial planner and co-founder of Rocket Dollar, is projecting continued upward momentum for gold prices, anticipating a steady climb towards a potential price of $2,800 per ounce.

According to Yoshida, gold’s continued ascent is likely to be propelled by a confluence of factors, including central bank purchases and Federal Reserve rate cuts, which have historically driven investors towards the perceived safety of gold.

Will Rhind, CEO of investment company GraniteShares, draws on the gold market’s historical performance following a 50-basis-point rate cut to construct his projection for gold’s future price.

Citing data from recent years, Rhind points out that “gold prices have appreciated an average of 8.5 percent in the six months following a rate cut of 50 basis points.” This insight, along with the current market conditions, drives his bullish forecast of gold reaching $2,700 per ounce by the end of October.

Gold Predictors has identified $2,075/ounce as a crucial level to watch in the gold market. This level,according to their analysis, has been repeatedly tested, and the most recent breakout beyond it resulted in a strong rally.

However, the Gold Predictors analysts believe that this initial surge is merely the beginning. They posit that the market is currently in a consolidation phase, gathering strength before embarking on the next leg of its bullish ascent.

Dilin Wu, research strategist at Australian online trading platform, Pepperstone, weighed in on the potential catalysts that could propel gold to surpass its record high of $2,700, in a recent note to Business a.m.

According to Wu, two major risk events are on the horizon that could provide the impetus for gold’s ascendancy: a rise in geopolitical tensions and a sharp decline in US employment numbers.

Wu stated: “First, any sudden escalation in geopolitical conflicts could dramatically increase market volatility. Markets have historically struggled to accurately price risk around geopolitical tensions, so any shifts in rhetoric from conflicting parties that increases the risk of an energy supply shock or involvement from a Western government could significantly shake investor sentiment. With Brent crude being a key risk gauge for the perception of supply, we could easily see gold’s correlation with oil strengthen significantly.”

Gold analysts have predicted that a sustained bullish trend could see the precious metal reach new heights, potentially breaking through the $3,000 barrier.

While a stronger-than-expected U.S. jobs report in September temporarily halted gold’s rally towards $2,700, weakening the case for a more aggressive Federal Reserve rate cut in November, analysts remain bullish on the precious metal’s long-term prospects.

Recent reports indicate that gold-related exchange-traded funds (ETFs) have attracted considerable inflows, suggesting that investor demand for the precious metal remains robust.

In fact, the influx of capital into gold ETFs has been so significant that Finbold, a leading financial news website, predicts that gold is poised to achieve its best annual performance since 1979. 

Analysts have noted that gold’s resilience is being demonstrated in its refusal to sell off, remaining firmly ensconced in a narrow trading range just below its all-time high, as reported by Zerohedge.

Despite the U.S. dollar strengthening to its highest point in two months, which typically has an inverse relationship with gold, the precious metal has demonstrated remarkable stability, holding fast at around $2,653 per ounce.

The Nigerian government, in June 2024, announced a successful commercial transaction of raw gold sales at the London Bullion Market Association in June 2024.

According to Dele Alake, minister of solid minerals development, this sale led to an increase of $5 million in Nigeria’s foreign reserves, the refinement of over 70 kilogrammes of gold to the London Bullion Market Good Delivery Standard, and the injection of around N6 billion into the rural economy, which positively impacted local development.

Alake,while highlighting Nigeria’s vast untapped gold reserves during his assessment of the country’s gold production capacity, stated that the country possesses an estimated  600,000 tonnes of gold, valued at  $45 billion, located in various states, including Osun, Zamfara, Edo, amongst others.

Commodity market analysts have also pointed out that Nigeria has the ingredients to become a major player, both regionally and potentially globally, in the gold market. 

However, to achieve this status, they posit that Nigeria must develop a comprehensive strategy that optimises the full potential of gold trading while simultaneously combating the illegal mining of gold, which has been a persistent obstacle to the country’s gold production and revenue generation.

In a development for the Nigerian gold sector, the Senate passed for second reading, in June 2024, a bill titled “An Act to make provision for Nigeria Gold Reserve Industry”.

The legislative initiative, sponsored by Natasha Akpoti-Uduaghan (PDP, Kogi Central), aims at establishing a legal framework to facilitate the effective exploitation, management, and marketing of gold in the country.

Natasha in her lead debate on the bill stated, “The proposed legislation presents a significant opportunity to drive economic growth and diversification by creating a conducive environment for investment in the gold sector, that can attract both domestic and foreign investors, stimulate job creation, and boost revenue streams for the government.

“It incorporates stringent regulations to minimise the ecological footprint of gold mining and processing activities.

“By adhering to international best practices in gold mining and trading, the Nigerian Gold Reserve Bill positions Nigeria as a reliable and responsible player in the global gold market which will enhance our competitiveness on the international stage and strengthen investor confidence in our gold industry.

“Specifically, the bill seeks to establish the Nigeria Gold Authority (NGA) that will be charged, among other things, with the administration of Nigerian Mining Act with regards to our gold resources.”

Senators who participated in the discussion of the bill were unanimous in their support for its passage, recognising it as a necessary piece of legislation that would harness the full potential of Nigeria’s vast gold reserves for the benefit of the Nigerian economy.

Nere Teriba, the vice-chairman of Kian Smith Refinery, a gold exploration and mining firm, echoed similar sentiments, emphasising the need for Nigeria to adopt a strategic approach to gold mining and trade.

In Teriba’s view, Nigeria must take advantage of its abundant untapped resources to develop a coherent plan that fully exploits its vast gold reserves.

The vice-chairman of Kian Smith Refinery, also advised Nigerian investors interested in the gold market to employ a hybrid approach that incorporates both fundamental and technical analysis.

According to Teriba, investors must keep themselves informed about global economic trends, utilise sophisticated trading instruments, and remain flexible in adapting their strategies to the changing market landscape.