CAIRO: In a period of uncertainty in the global economy, the price of gold, traditionally seen as a safe haven for investors, has surged in Egypt, jumping LE 30 per gram in just two weeks.
“In the last few weeks, prices of gold have been increasing in an unbelievable way, like LE 5 or LE 6 in just one day,” said Ahmed Sirgany, a Cairo jeweler.
“The price went from LE 260 for one gram of gold to LE 296 today… this is also the first time for me as a jeweler to see the price of gold and diamonds go up at the same time,” he added.
The international price for one gram is usually LE 1 or 2 more than that of Egypt, he added.
However, while prices are up, his store’s sales overall have not been faring well.
“We are doing good now because of wedding season [is approaching], a lot of people get married during Eid after Ramadan or in the summer, so we are selling diamonds and jewelry sets that people usually buy for their brides, but other sales are not doing well,” he said.
According to Angus Blair, head of research at Beltone Financial, investors are taking a defensive stand during this murky period in the world’s economy.
“In these times, people take up safe commodities whether its pharmaceuticals or defensives stocks,” he said. “It’s likely that they will continue to rise as long as this underlying fragility in confidence remains.”
The recent US credit downgrade, which will have an impact on the depreciation of the dollar, has also caused investors to seek other currencies, even if it means stepping away from paper money.
In Egypt, gold remains high-priced at LE 310 per gram for 22-carat, LE 339 for 24-carat, LE 296 for 21-carat, and LE 254 for 18-carat gold.
On an international level, spot gold touched an all-time peak of $1,813.79, before easing to $1,778 at 1052 GMT on Thursday, according to Reuters.
The recent surge is a clear indication that most of the world’s major markets are in for hard times.
“People are moving their savings from paper money because most currencies today including the Euro, and the Japanese Yen will also be affected by the depreciation of the US dollar,” said Magda Kandil, executive director for the Egyptian Center for Economic Studies.
Kandil also points out that many investors and savers have been moving their savings and buying different commodities and gold has been on top of their lists.
Furthermore, even central banks across the globe have “learned their lesson” and are trying to diversify their foreign reserves.
“To pay for import or foreign debt, the banks that hold international reserves like China, India, or the Gulf for example are looking for ways to diversify because the purchasing power of reserves is eroding due to the depreciation of the dollar,” Kandil added.
In Egypt, since the political turmoil of the January 25 Revolution, gold prices have been on the rise due to the fact that many people are looking for an alternative to paper money.
Before the revolution, investors would turn to real estate because the situation in the country was seemingly stable. But economic instability brought gold back in investors’ focus.
“The latest crisis surrounding the dollar in particular is also likely to increase the tendency for a while,” Kandil pointed out.
“During the revolution, many people switched from Egyptian pounds to dollars, but now the dollar itself has been subject to questions regarding its own stability because the impact of the US credit downgrade.”
The Euro has also been seeing its share of problems with the recent uncertainty hitting the European Union’s banks and the Greek debt crisis, which left many bankrupt and caused others to also take to the streets and demand economic and social reforms.
