Progress in the trade negotiations between the US and China has led to lower demand for safe-haven assets like gold.
Gold saw its biggest weekly loss in three years in the week to Monday, falling about four per cent from approximately $1,510 to $1,455 an ounce in the international market.
There was also a halt in the gold-buying spree by major economies like China and India. The latter’s gold imports fell by 46 per cent in year-to-year comparisons to 20.8 metric tons in October. China also stopped buying gold in October for the first time after 10 months of continuously purchasing the yellow metal, accumulating 100 tons from December 2018 to September 2019.
Gold is considered by many to be a safe-haven asset, which makes investors buy the precious metal at times of economic or political instability.
Experts believe that the international trade war between the US and China is the main reason behind the fluctuation in gold prices in recent months, leading to a price of $1,510 an ounce last week, the highest since 2013. The all-time high was $1,921 an ounce in September 2011.
According to the news agency Reuters, officials from both sides said last Thursday that the two countries had agreed to roll back tariffs on each other’s goods in a “phase one” trade deal.
“Talks between the US and China to resolve their trade conflicts have definitely contributed to the falling prices of gold,” said Ehab Wasef, deputy head of the Gold Division at the Federation of Egyptian Chambers of Commerce.
However, Wasef believes that the rising value of the Egyptian pound against the US dollar is also a main reason behind the falling prices of gold locally.
In the local market, a gram of 18, 21 or 24 karat gold was being sold for LE567, LE662 and LE757, respectively, on Tuesday. The prices were more than LE20 higher than a couple of weeks ago.
The Egyptian pound has been gaining ground against the dollar over the last few months, backed by stronger foreign-currency inflows, mainly from tourism and the remittances of Egyptian expatriates.
Net foreign reserves at the Central Bank of Egypt (CBE) at the end of September recorded about $45.118 billion, an all-time high, up by about $149 million from $44.969 billion at the end of August.
The London Metal Exchange announced on Monday that it doubted that any positive results would come out of the US-China trade talks, leading to a slight increase in gold prices internationally. An ounce of gold went up from $1,450 to $1,453 on Tuesday.
Wasef believes it is still a good time to invest in gold, as he believes the yellow metal will rise in value again over the coming months.
*A version of this article appears in print in the 14 November, 2019 edition of Al-Ahram Weekly.