With the commodity maintaining its status as a safe-haven asset amid economic uncertainty, the stakes are high for African economies—especially those heavily reliant on commodities or with currencies pegged, informally, to the U.S. dollar.
Gold prices rebounded on Thursday, recovering from a sharp midweek drop as global investors seemingly reevaluated various factors relating to U.S. trade policy, inflation, and monetary tightening.
However, for African economies, the story goes beyond market sentiment and could be seen as a signal of widening currency pressures and rising borrowing costs.
“Gold prices tend to go up in times of uncertainty. And this time the uncertainty is unprecedented,” Nigerian investment commentator, Efe Ogunnaiya, says to FORBES AFRICA. “For us in Africa, gold is tied to USD and, as such, it has brought pressure on our currencies.”
Earlier in the week, gold surged to an all-time high nearing $3,500 per ounce. This was reportedly driven by escalating tensions between the U.S. and China, and market concern around public discourse on Federal Reserve Chair, Jerome Powell by U.S. President, Donald Trump.
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But that momentum reversed on Wednesday after Trump signaled a likely reduction in tariffs and affirmed that he would not remove Powell—triggering a swift pullback in gold to around $3,350 by Thursday. FXstreet reported that the gold price lowered to around $3,310 in Monday’s early Asian session.
The dollar index, a measure of the greenback’s strength against other major currencies, has declined by about 8% over the past few months. However, this hasn’t translated into relief for African currencies like Nigeria’s naira.
“The dollar is still strong relative to what’s happening in our local markets,” Ogunnaiya explains.
“If we add the gold element to it, you see that [it] has helped investors to weather inflation and currency volatility.”
The knock-on effect for Nigeria has been immediate. To contain demand for dollars and attract capital, the Central Bank of Nigeria (CBN) has raised rates on short-term Open Market Operations (OMO) bills. The 319-day tenor is now yielding approximately 22.7%. At the same time, yields on Nigeria’s Eurobonds have surged by nearly 200 basis points as investors reprice risk.
Meanwhile, some analysts have said that the recent pattern in gold pricing—a bearish “shooting star” technical formation—suggests caution. While gold may still reattempt its record high, traders are closely watching support zones around $3,145 and $2,955, which align with key Fibonacci retracement levels and previous swing highs.
For Africa, the implications of this volatility are far-reaching. Commodities like gold serve as a buffer for countries facing external shocks, but the same safe-haven appeal is drawing capital away from riskier assets—including African sovereign debt and equities.
“This pause that the U.S. has placed [on tariffs] means that other governments and investors now have to recalibrate their worst-case scenarios,” Ogunnaiya says. “In doing so, they’re looking for strategies that will calm down portfolios.”
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