The price of gold has experienced a sluggish rise in 2023

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Markets

• The benchmark NGX All-Share Index (ASI) inched up 157.09 (0.24%) points to close at 65,558.91, showing a week gain of 1.26%, 4-week gain of 0.77%, and an overall year-to-date gain of 27.92%. Skye Shelter Fund led the gainers with 9.97% share price appreciation closing at NGN 83.80 per share, followed by National Salt Company (+9.95%), FTN Cocoa Processors (+9.94%) and N.E.M. Insurance Company (+9.9%).

• Oil futures climbed about 1% to a one-week high on Friday as number of oil rigs dropped. Brent futures rose US $1.12, or 1.3%, to settle at US $84.48 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 78 cents, or 1.0%, to settle at US $79.83.

• Naira was down at both the I&E Window and the street market. Naira depreciated by 0.87% on the I&E exchange, closing at N778.42 to the US dollar. On the streets, Naira was down by 1.80%, reaching a value of N920 against the US dollar.

• U.S. natural gas futures edged up about 1% on Friday on forecasts for hot weather to continue into next week, forcing power generators to keep burning lots of gas to produce electricity for air conditioning.

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National Headlines

• Nigeria’s GDP growth slowed to 2.51% - Nigeria’s Gross Domestic Product (GDP) growth rate slowed to 2.51% y / y in Q2 2023 compared to 3.54% recorded in Q2 2022, but an increase of 0.2% compared to 2.31% of Q1 2023. This growth rate is awful for two reasons. First, the growth rate for the current quarter – Q3 2023 is expected to come lower, following the removal of fuel subsidies, tight government expenditure following elections, high and volatile exchange rates, and worsening business environment. Second, in the absence of any serious and concrete measures at dealing with oil theft, targeted investment opportunities and expenditure, this may be the start of another slippery slope to recession like in 2016.

• Oil theft is still key – The National Security Adviser (NSA), Malam Nuhu Ribadu reiterated over the weekend that Nigeria is still losing about 400,000 barrels of oil to theft daily. This remains the greatest threat to Nigeria’s economy and dealing with it should of the greatest priority to the President and the government.

Global Headlines

• Profits at China’s industrial firms fell 6.7% in July – Every new data and indicator continues to show that the Chinese economy is weak. Compared to last year, Chinese companies’ profits are shrinking. Data on earnings show a 16.8% decline from last year for H1 2023. Earlier in the month, NBS Data shows the economy grew just 0.8% in the Q2 2023, down from 2.2% in Q1 2023.

• UK interest rates to remain high – Interest rates in Britain might have to stay high "for some time yet," Bank of England Deputy Governor Ben Broadbent said during the weekend. Earlier this month, the Bank of England raised rates to 5.25%, while July inflation was 6.8%, more than twice the 2% target. The next meeting of the monetary policy committee (MPC) of the Bank of England will hold Thursday September 21. Also, Latvian policymaker Martins Kazaks thinks it will be too early for the European Central Bank (ECB) to pause rate hikes. The interest rate in the zone is currently 3.7%, while inflation is 5.3% in the zone.

The price of gold has experienced a sluggish rise in 2023

Gold price has experienced distinct phases since the start of the year. While it has increased by 6% to date, from $1,826 in December to $1,939.90 as of August 25, 2023, it experienced uptick in January, considerable decline in February, a sharp rise in March, and slight volatility afterwards.

Two significant factors have impacted gold's price movement. Firstly, the hike in interest rates has played a pivotal role. The US Fed, Bank of England (BOE) and the European Central Bank (ECB) have all raised rates considerably this year, reaching 5.5%, 5% and 3.5%, respectively. Also, related to rise in interest rates, gold price movements have been influenced by the performance of the US dollar index.

Despite successful inflation reduction in numerous Western nations, other factors remain influential, including stock market volatility, geopolitical concerns, and the potential for future financial crises. Consequently, hedge strategies, including investments in gold and other commodities, are likely to persist as viable options during times of economic uncertainty.

This Week

• Germany’s August inflation rate is expected to be released. The Consumer Price Index in Germany increased by 0.30 percent from a month earlier in July of 2023, the same pace as in the previous month.