Exclusive | The Secret Unfolded: Why Gold Prices in Egypt are Falling?

Updated 5/27/2024 2:28:00 PM

Arab Finance: Several gold experts have attributed the recent decline in gold prices in Egypt to a drop in global gold prices per ounce.

Additionally, the US Federal Reserve’s direction towards raising interest rates and tightening monetary policy over the coming period due to persisting inflation have also contributed to this decrease.

Nady Naguib, Secretary-General of the Gold Division at the Federation of Egyptian Chambers of Commerce (FEDCOC), told Arab Finance told Arab Finance that gold prices in Egypt recently dropped impacted by decreased global prices of gold per ounce.

This downturn was coupled with weak demand for gold in a time marked by a season of holidays and occasions, including the holy month of Ramadan and Eid El-Fitr, Naquib said.

Moreover, he expects the demand for gold to increase after Eid El-Adha and the end of the exams time.

Weak Purchasing Power

Purchasing power in Egypt has been weak lately, which has affected the demand for gold, Naguib noted.

Last week, the price of gold in Egypt fell by around EGP 100, mirroring global declines following the release of the US Fed’s minutes, he mentioned. The minutes indicate the Fed’s inclination to raise interest rates in its upcoming meeting.

Naguib added that the Central Bank of Egypt’s (CBE) decision to maintain interest rates last week also contributed to the decline in gold prices.

Meanwhile, Amir Rizk, a gold market expert, highlighted that both global and local factors have pushed down gold prices in Egypt.

These factors include the customs exemption initiative for gold imported from abroad. This initiative contributed to boosting the local gold supply, leading to a substantial cut in prices, as per Rizk.

Other significant factors are the stable exchange rates and the absence of parallel market following the Ras El-Hekma deal and the recently agreed-up program with the International Monetary Fund (IMF), he explained.

These agreements have helped pumping billions of dollars into Egypt’s foreign exchange (FX) market, scaling up hard currency supply in the state, and consequently, stabilizing gold prices, Rizk said, pointing out that gold prices per ounce in Egypt are evaluated based on the official dollar rate.

It is noteworthy that financial pressures in Egypt have recently eased after the government struck a record deal to attract $35 billion worth of Emirati investments for the development of the Ras El-Hikma city project.

In addition, the government expanded its loan program with the IMF to $8 billion from $3 billion and greatly devalued the local currency last March.