Golden Allure for Investors
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Transcript of Golden Allure for Investors
| Nairobi Business Monthly May
security concerns.
“Today most of the jewellery in Kenya comes
ready made from Dubai,” said Mr B Shah, a
local dealer with over 30 years of experience
in precious metals and stones. He remembers
a time, shortly after independence, when street
vendors would manufacture gold chains on
Biashara Street, and over 50 jeweller shops
lined River Road in downtown Nairobi. Rising
insecurity however put an end to the trade and
today the sole jeweller shop on River Road is
Nagin Pattni.
Money &Markets
Ethiopia howeverstands out in the
East African region asa country where gold istraded in street kiosks.
West Africa too is hometo a bustling trade in gold
jewellery.
During the colonial days, gold biscuits were
legally traded in Kenya through over the counter
purchases at local banks, said Mr Shah.
Today, some Kenyans continue to invest in
biscuits that are purchased from gold havens
like Dubai, but they are not legally traded here as
they are elsewhere in the world. In Switzerland,
for instance, a square of a gold biscuit (akin to
a Cadbury’s bar) is broken o and can be given
out in lieu of a payment.
Ethiopia however stands out in the East Afri-
can region as a country where gold is traded
in street kiosks. West Africa too is home to a
bustling trade in gold jewellery.
Despite the recent fluctuations in the inter-
national price of gold, the New York Times
reports that anyone who bought gold in 1999 and
held onto it has still performed better than the
average stock market investor because it is not
subject to the same market driven fluctuations.
And even after the recent decline, the price
of gold is still up 515%. Unlike other financial
assets, however, gold does not produce a stream
of income either as rent or dividends.
BY AKINYI JOSEPH
A 15% drop in the price of an asset over a 2
week period is one that would leave any
investor economy trembling. But the drop
in the international price of gold from Sh 4,800
per gram to Sh 4,200 per gram (as at 23rd April)
has had little e ect on the Kenyan economy.
It has hit countries like China, South Africa,
India, Australia, the Congo and a city like Dubai
renowned for its gold exchange the hardest
since they either produce gold or use it in local
manufacturing. Kenya has been prospecting
for gold at its Migori, Kuria West and Nyatike
mines in South Nyanza since 2009, but is not
yet a producer.
China and India are acknowledged to be
some of the higher consumers of the precious
metal. While China uses a substantial amount
of adulterated gold in the components of its
electronics sector - valued because it is a poor
conductor - India consumes large quantities
in its marriage trade.
A poor family in India uses at least ten tolas
(120 grams) in each marriage while there is no
limit to the amount used in the more extravagant
wedding ceremonies.
In the United States, gold is consider to be
a stable investment in a time of international
recession, and is preferred to instruments like
real estate and mutual funds since it is insulated
from inflationary pressures.
The ordinary American investor plows an
unknown amount into government minted
coins, publicly traded commodity funds, mining
company stocks and physical bullion. With the
recent drop in price of gold, the vault of the
Federal Reserve Bank of New York, the world’s
largest trove of gold, experienced a $75 billion
loss in value.
In Kenya, the precious metal is not traded
legally and few people wear gold because of
The golden allure for investors
INSTRUMENTS
Countries that rely on theprecious metal count their lossesas the price of gold plummets