Over the past years, gold has become one of the most lucrative investment opportunities in Kenya. It is especially the ability to serve as a hedge against inflation and currency fluctuations what is making gold an appealing investment, especially in Kenya where economic and political conditions can be volatile. As for the global gold market, it is projected to continue its upward-going trend, which is why investors in Kenya are keen to turning into gold. But navigating the gold trading landscape in Kenya requires strategic planning, including deep insight into the dynamics between the local and global markets. This article will provide you with 7 strategies on how to trade gold to maximize your returns on your investments.
Understanding the local gold market
Before you can dive into the depths of gold trading, you need to learn how to swim first by building up a thorough understanding of the local market. Kenya is a significant player in the gold trade within East Africa, with a gold production that has been steadily increasing over the past decade. According to the Observatory of Economic Complexity, Kenya's gold exports grew to $191 million in 2022, making Kenya the 81st largest exporter of gold in the world. This is a number that has been going up for years, and this steady increase is due to the rise in artisanal mining activities, coupled with the discovery of new gold reserves in regions such as Migori, Kakamega, and Turkana.
Regulatory changes is also important to know about since they influence the local market. One such example is the recent establishment of a gold refinery in Nairobi, which has been established with the aim to streamline gold processing and improving the quality of locally traded gold. Such information is important to consider, since it reflects the dynamics of the local market, which helps you to make informed decisions.
Leveraging international market trends
Global market trends are also important to stay on top on, since gold prices in Kenya are not insulated from what is happening on the global markets. One example of the dynamic between the global and local market is during the COVID-19 pandemic: The price of gold surged to an all-time high in 2020 due to the pandemic, which started a rush towards safe-haven assets. This became beneficial for investors in Kenya who took advantage of this global trend, as the local gold prices were mirroring the global market.
To succeed in gold trading, you should keep an eye out for global economic indicators, which could be the performance of the U.S. dollar, geopolitical tensions, and central bank policies.
Diversify investment portfolios
A fundamental strategy to any investment portfolio is to diversify investments, which is also the case for gold trading. Gold should never be the sole focus of an investment strategy, but instead you should always consider a mix of assets such as real estate, stocks, and bonds.
Gold is especially beneficial as a hedge during periods of market volatility, but it should still be balanced out with other investments to generate returns during different market conditions.
Investing in gold-ETFs and mutual funds
If you are not interested in engaging with physical trading of gold, you can choose to invest in gold Exchange-Traded Funds (ETFs) or mutual funds. Gold ETFs are a way to get exposure to the gold market without needing to physically own gold.
Among institutional and retail investors in Kenya gold ETFs are becoming popular, as these are traded on the stock exchanges just like stocks. It is therefore a convenient and cost-effective way to gain exposure to the gold market. Another way to do so is by investing in mutual funds which are invested in gold-related assets such as mining companies.
Understanding regulatory frameworks and compliance
The gold trading landscape in Kenya is embedded in a complex set of regulations, enforced by the Ministry of Mining and the Kenya Revenue Authority. Since the government introduced new regulations in 2019 to address illegal gold trading, there are now stringent requirements for licensing and export permits.
Any trader of gold must comply with all legal requirements to avoid fines or getting assets confiscated. This is why it is important to stay updated on regulatory changes, since non-compliance can have both financial and legal consequences.
Networking with industry expert and stakeholders
A powerful tool in the gold trading industry is networking. By building relationships with industry experts, mining companies, and government officials, you can gain valuable insights and early access to market opportunities.
In Kenya you can join forums such as the Kenya Chamber of Mines and regional mining conferences, which are all platforms for networking and learning from industry leaders. If you stay engaged in these networks, you can stay informed about market trends, regulatory changes, and new gold discoveries.
Utilizing technological tools for trading
It has become easier for you to access real-time market data through online trading platforms, mobile apps, and advanced analytical tools. This makes it easier to execute trades and monitor your portfolios.
You can also leverage algorithms and artificial intelligence (AI) to analyze market trends and predict price movements. This is a way for you to safe time on market research, and you can see an improved accuracy of trading decisions. Embracing technology can there provide you with a competitive edge in the world of gold trading in Kenya.