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Egypt’s Gold Market Experiences Turbulence with Record-Breaking Prices

January 5, 2024
Photo credit: Daily News Egypt.

Significant fluctuations in gold prices have recently dominated the market in Egypt, creating a tumultuous environment for investors and traders alike. The price of 24-carat gold reached EGP 3,657 (USD 118.76) Egyptian pounds for selling on Friday, 5 January, 

Reports have emerged detailing instances of trading platforms experiencing abrupt shutdowns, resulting in hours-long suspensions of all buying and selling operations.

Nagy Farag, the Advisor to the Supply Minister for Gold Industry Affairs, explained that global factors, including a USD 100 (EGP 3079) increase in the international gold price, have led to the rise in gold prices in the local market, surpassing the unprecedented EGP 3,000 (USD 97.42) mark. 

“With the surge in local demand in a short period, this leads to unjustified and sometimes illogical increases – as is the case with the current situation – and accordingly, the price ends up not corresponding to global or local conditions,” he added to Sky News Arabia.

Among the prominent factors contributing to these dynamics is the increasing buying waves for hedging, as Egyptians anticipate a new devaluation of the Egyptian pound expected to take place at the beginning of the coming year in 2024.

The General Gold Division of the Federation of Egyptian Chambers of Commerce denied a halt in sales activity in the local markets. 

The rapid price changes led to confusion in some stores, resulting in a temporary suspension of sales for a few minutes to settle buying and selling prices.

Hany Milad, head of the division, attributed the price fluctuations to global changes, including economic difficulties and the US Federal Reserve’s statements about a potential decline in interest rates. Milad even predicts an increase in gold prices based on these indicators.

Reports suggest that the US Federal Reserve is considering interest rate cuts in 2024, with the possibility of three cuts throughout the year. The concern is that maintaining high-interest rates could push the US economy into a recession.

Farag believes that “the market is likely on its way to stabilization, as this situation has repeated before after gold prices penetrated high levels and then retreated afterward.”

Historically, gold has served as a hedge against inflation and a store of value. In 2022, gold rose by EGP 852 (USD 27.67) per gram for 21-carat gold, with a percentage increase of 106.7 percent, while last year it rose to EGP 1480 (USD 48.06) per gram, showing an 87.5 percent rise. 

Many Egyptians believe that gold helps preserve purchasing power and provide stability during economic uncertainties. The well-established gold market in Egypt makes it easily accessible for investors. 

In May of 2023, the Egyptian government, in an effort to control the rising prices, approved the exemption of gold imports accompanying individuals coming from abroad from customs duties and other fees, except for value-added tax (VAT), for a period of six months.

Farag notes that the initiative has positively impacted market stability and contributed to the entry of up to two tons of gold into the local market.

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