Nigerian gold falls to N176,000 per gram after US stock market selloff

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 have had to contend with turmoil in overseas equity markets.

Metal traders are reassessing staple safe-haven instruments as sentiment shifts away from risky US equities and the macroeconomic environment evolves. Bloodbaths in global stock markets are likely to force institutional investors to sell gold to meet margin calls when they de-leverage, as their risky equity holdings lose money. Gold then draws capital to avoid risky share markets.

Local gold mirrors global spot market

Nigeria’s institutional investors and affluent women often hedge with spot gold to protect themselves from systemic inflation and naira devaluation. But a stable naira exchange rate, roughly N1,350/$, has also weakened gold prices in Nigeria compared with 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 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. Spot gold, XAU/USD, fell almost 1% to settle at $4,060 per ounce after reaching $4,106 per ounce at the last trading session of the week.

For the week ended November 6, the naira weakened 0.22% as FX turnover slowed to $1.45 billion in November’s first week. The NGX shed another N540 billion as MTN Nigeria, Zenith Bank and GTCO dragged stocks lower.

US jobs surprise lifts dollar

The correction in spot gold was driven by the October NFP report, which showed the US economy created 165,000 jobs, compared with a forecast of only 65,000. The September NFP figure was also revised from 29,000 to 60,000. The wider job gains pushed the US unemployment rate down to 4.1%.

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, 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.

Geopolitical tension supports safe haven

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 as the next conclusive indicator of US inflation and Federal Reserve policy, after gold relinquished its highs following the jobs surprise.

For Nigerian investors, the local gold price is now tied closely to global spot moves and a steadier naira. That leaves less room for currency-driven gains in naira terms, even as demand for hedges persists.