PENTALK360 
Gold prices reached an all-time high during Friday’s London trade, driven by speculation that the U.S. Federal Reserve may cut interest rates in the coming week. The anticipation of rate cuts, combined with the growing demand for safe-haven assets ahead of the tight U.S. presidential election, pushed the precious metal’s value to unprecedented levels.
Spot gold surged to a record $2,570 (N4.23 million) per ounce, while gold futures neared $2,600 (N4.28 million). The rise in gold prices also followed declines in both Treasury yields and the U.S. dollar, signaling investors’ increasing expectations of a rate cut despite recent inflation data.
Nigerian Lawmakers Advocate Gold Reserve Expansion
In Nigeria, legislators are pushing for an expansion of the Central Bank of Nigeria’s (CBN) authority to bolster the country’s foreign reserves with gold. A proposed Senate bill seeks to raise the share of gold in Nigeria’s reserves to at least 30%, up from the current 4%. The bill also aims to establish the CBN as the official buyer of all domestically produced gold, formalizing the legal framework for Nigeria’s gold mining industry.
The push comes as Nigeria battles near-record inflation, fueled by economic reforms including the removal of fuel subsidies and the unpegging of the naira from the U.S. dollar. These factors have led to the currency losing over two-thirds of its value in the past year.
President Bola Tinubu, since taking office in May 2023, has focused on modernizing the mining sector, particularly in low-grade lithium deposits. Nigeria holds an estimated 21 tons of gold reserves.
Global Trend of Gold Repatriation
Nigeria’s effort to build its gold reserves mirrors a broader global trend, as more nations seek greater control over their gold amid concerns about Western nations’ use of foreign reserves for policy leverage. In a 2023 World Gold Council survey, a significant number of central banks expressed concern about potential sanctions, citing the freezing of nearly half of Russia’s $650 billion in gold and foreign exchange reserves following its invasion of Ukraine.
Sixty-eight percent of central banks surveyed indicated plans to hold their gold reserves domestically.
Interest Rate Cut Speculation Drives Gold Gains
Investor sentiment remains strong that the Federal Reserve will lower interest rates in its meeting next week, although the extent of the cut remains uncertain. Strong inflation data earlier in the week had dampened hopes of a large reduction, but softer labor market data released on Thursday revived speculation of a more aggressive 50 basis point cut.
According to CME FedWatch, traders now price in a 58% chance of a 25-basis point cut and a 42% chance of a 50-basis point cut. Regardless of the outcome, experts widely anticipate an easing cycle by year’s end, with total cuts expected to reach 100 basis points.
Lower interest rates are typically bullish for gold, as they reduce the opportunity cost of holding non-yielding assets like precious metals. Investors continue to look to gold as a safe hedge in times of economic uncertainty and fluctuating market conditions.
