As per the report, Egypt was the most significant contributor to the growth of investments in gold bars and coins in the Middle East, accounting for nearly a third of the region's total demand of 32 tons.

The total demand for gold in Egypt for the first half of 2023 is close to 2022's annual total, as Egyptians resort to the yellow metal as a safe haven to hedge against the inflation exacerbated by the devaluation of the local currency, the report's data showed.

The Egyptian pound exchange rate against the USD has undergone frequent changes since March 2022 on the heels of the Russian-Ukrainian war, losing over 75 percent of its value.

The USD/EGP rate jumped from EGP 15.7 to EGP 18.56 in March 2022, then moved gradually to EGP 19.66 until 28 October, when it surged to EGP 23.15. By March 2023, the USD stood at about EGP 30.9, where it remains today.

"A relaxation of restrictions on hand-carried gold has eased supply conditions in the local market and this is reflected in lower premiums on gold investment products. Demand remains robust in the face of a challenging economic backdrop and potential further currency depreciation,"  read the WGC report.

Egyptian Prime Minister Mostafa Madbouly issued a decree on 11 May exempting travellers carrying gold from customs duties and other fees – except value-added taxes (VAT) – for a period of six months. The decision was meant to address the shortage in gold supply in the local market, which resulted in a surge in prices.

Gold prices have been stable since the beginning of July. They have been steadily continuing on a declining trajectory since May. The price of 24-carat gold reached EGP 2,445.75 per gram on Monday, 31 July, down 7.7 percent compared to its level on 1 June and 17.6  percent compared to 1 May level.

Global demand stays solid
 

The demand for gold by central banks declined globally during the second quarter of 2023. However, the impact on the total demand was marginal.

In Q2 2023, gold demand (excluding over-the-counter, or OTC market) dropped slightly by two percent annually to 921 tons, driven by a marked deceleration in net central bank buying compared to above-average purchases in Q2 2022.

The total global demand, if OTC and gold coming from existing stockpiles (stock flows) are included, will increase by seven percent yearly to 1,255 tons in Q2 2023.

OTC (also known as “off-exchange trading”) occurs directly between two parties, unlike exchange trading.

In global markets, gold for December delivery rose $9.30 to $2,009.20 an ounce on Monday.

In June, WGC reported that central banks' official gold reserves declined by 71 tons in April mainly due to Turkey's selling of 81 tons on its domestic market to meet surging local demand.