Nigeria’s gold prices are steady at N178K per gram despite a strengthening Nigerian currency and the US central bank’s hawkish tilt. Gold sellers in the main gold markets in Nigeria, Lagos, Kano, and Abuja, usually charge a domestic premium of 5%–10% above the spot rate.
An appreciating Nigerian naira automatically makes naira-terms cost to buy dollar-quoted ounces more affordable as gold prices are quoted globally in US dollars, which pushes prices down locally.
Gold’s price action in Nigeria
The 20-day SMA has flattened at around 179,000/g as profit-taking in the near term keeps prices in a range. RSI (14 Day): Enclosed in 48-52 (Neutral), reflecting balancing out of international bullion price gains & MSFX Appreciation (Sustainable or Overextended Upticks).
Demand from buyers remains strong around the N175,000/g.-N177,000/g level support, driven by retail jewelry and private asset protection buying.
Breakout Signal: A Sustained close above N182,000/g may suggest a retaking of the local bullish trend, with a possible pick-up at the pace of currency weakness and/or a sharp rally in spot gold prices.
Fundamental action
The Nigerian Federal Ministry of Solid Minerals and the Central Bank of Nigeria (CBN) have also maintained the drive to buy Nigerian-mined and refined gold bullion to cushion the country’s foreign reserves and liquid cash against devaluation.
The CBN National Gold Purchase Program (NGPP) buys domestic refined gold in naira to boost strategic foreign reserves and reduce foreign exchange risk.
The NGPP provides a structural floor to the domestic price of gold in naira. A premium to the NGPP is usually required to account for short-term variation in the exchange rate and international spot prices of gold. Consistent institutional demand for domestic bullion comes from the central bank’s purchases.
US Treasury yields and intermittent rebounds in the US Dollar have put a lid on explosive upside gains for the time being, prompting a consolidation corridor for global bullion. Adoption of LBMA-compliant standards in West Africa is boosting cleaner export pipelines and local market liquidity.
Spot gold found support above several key psychological levels on the back of the US jobs data cooling inflation expectations, which subdued odds of a more aggressive Federal Reserve interest rate hike. Gold is a zero-yield asset, so a pause in rate hikes is typically supportive.
Inflation acceleration concerns stemming from the potential for energy-driven inflation to threaten to continue providing a drag on gold. Indeed, crude prices hit a near two-week high as markets fretted about supplies amid Middle East tensions.
Fighting between the Iran-allied Houthis and Saudi Arabia has intensified over the past week in retaliation for the kingdom’s support of Yemeni government forces. Moreover, Houthi energy terminals and fuel reserves in Yemen were reportedly struck by a Saudi-led coalition.
Meanwhile, the American dollar remains under bearish pressure for the second day in a row and comfortably below its 2-week high, helping the metal to regain some positive traction. The bearish fundamental backdrop, however, warrants caution before traders set up their next directional move in gold and look for sustained strength beyond a near-term trading range.