The rapid increase in the international and local prices of gold over the past few weeks took its toll on the Egyptian gold market during the Eid Al-Adha holiday.
The Eid is traditionally a high season for the sale of various gold products in Egypt, but sales were very low this year, according to gold traders as prices went to record highs.
“We were waiting for the Eid Al-Adha to revive sales, but that didn’t happen,” said Mohamed Adel, the owner of a jewellery shop in Cairo. “The sudden increases in the international prices of gold have affected us in a bad way,” he added.
Gold is currently trading on international markets at slightly over $1,500 an ounce, with approximately a $100 increase compared to prices at the end of July and the highest since 2013. The absolute high was $1,921.15 an ounce in September 2011.
The international trade war between the United States and China is believed to be one of the main reasons for this month’s hikes. However, gold prices fell slightly at the beginning of this week as a result of easing fears about major world economies going into recession.
According to the World Gold Council (WGC), an industry body, the falls were driven by a stronger US dollar, as well as rising European stock markets and China’s newly announced interest rate reform plan to support its slowing economic growth.
The WGC’s latest outlook report published at the beginning of August showed that the world’s central banks had bought 224.4 tons of gold in the second quarter of 2019. “This took first half buying to 374.1 tons, the largest net increase in global gold reserves in our 19-year quarterly data series,” the report said.
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.
In the local market, a g of 18, 21, or 24 karat gold was being sold at LE597, LE697 and LE796, respectively, on Tuesday. These prices are slightly lower than last week’s highest gold prices recorded in Egypt, which were about LE10 higher for the different grades of gold sold.
Gold prices spiked following the flotation of the Egyptian pound in 2016.
But despite the high prices, buying gold remains a necessity for some Egyptians as they tie the marriage knot, when the groom traditionally must give the fiancée jewellery as an engagement or marriage gift.
Engagement and wedding parties traditionally happen in the summer, and as the Eid Al-Adha approached, sales were expected to rise, but proved weak instead.
“People don’t want to buy gold as they are confused by the upwards fluctuation in prices,” said Mahmoud Abu Heiba, a jewellery trader in Giza’s 6 October city, adding that customers were refraining from buying gold because of the increased prices.
“I had to postpone buying jewellery for my fiancée until the prices go down again,” said 28-year-old pharmacist Shady Gamal, adding that he couldn’t have imagined how fast the prices would go up over the last couple of weeks.
Ehab Wasef, deputy of the Gold Division at the Federation of Egyptian Chambers of Commerce, said that prices were likely to continue going up in the near future. “Investors will continue purchasing gold as a safe-haven asset, as the trade war between the US and China is taking its toll on economic stability worldwide,” he added.
“I encourage buying gold as soon as possible, as we are bound to see more increases over the next few months,” he concluded.
*A version of this article appears in print in the 22 August, 2019 edition of Al-Ahram Weekly