In an unprecedented performance, global gold prices topped $1,900 per ounce last week, exceeding even the 2011 high prices, which were above $1,900.
The associate director of Kuwaiti precious metals trading firm Sabayik Al Kuwait, Ragab Hamed, shared with Ahram Online his thoughts and projections for global and domestic gold prices and the relationship with the COVID-19 crisis.
He also revealed that gold prices are expected to hit $2,000 per ounce in 2020, and between $3,500 and $5,000 per ounce in 2021 and 2022.
Gold prices have increased by 25 percent so far in 2020, he also said.
Ahram Online: How has the COVID-19 crisis contributed to the high price levels that gold has reached recently?
Ragab Hamed: COVID-19 is one of the causes that has contributed to the significant rise in gold prices globally in 2020, with global prices witnessing an increase by 19 percent in 2019 compared to 2018. In addition, the 2018 gold price level had increased by 5 percent compared to 2017.
Based on that, gold prices started increasing two years ago owing to the ongoing political and economic tensions between the US and China, in addition to the role of the US Federal Reserve and its negative interest rates. The COVID-19 pandemic has also caused a deterioration in the US economy, in addition to the impact of Brexit.
COVID-19 has been concluded to be among a wide range of causes that have led to soaring gold prices, which have increased by 25 percent compared to prices in 2019.
AO: Does this mean gold prices will continue their increase curve?
RH: I expect that gold prices will continue to rise even after the end of the COVID-19 crisis.
AO: How is the ongoing crisis affecting Egypt’s gold domestic market?
RH: The COVID-19 crisis has affected the domestic market significantly, causing a recession in the market for selling and buying gold jewellery, but has led to a high demand for investment gold like golden ingots and pounds.
When the crisis started in Egypt (in March), individuals and investors alike saw gold as a safe haven, thus, gold ingots, golden pounds and raw gold demand witnessed a notable increase in the local market -- the so-called investment gold -- while gold jewellery witnessed a drop.
AO: So, will gold maintain its position as a safe haven for savings?
RH: Through all the crises the world has witnessed, including the global financial crisis in 2008, the mortgage crisis in the US in 2011, the central banks’ crisis in 2018, and the current crisis, gold has proved its importance as a safe haven for the savings of individuals, investors, governments and central banks.
AO: What are your expectations for gold prices in the medium and long term?
RH: Gold prices are expected to hit $2,000 per ounce by the end of 2020 if the crisis and its related implications continue.
Moreover, the trend of adopting economic stimulus programmes and the US Federal Reserve’s tendency to decrease its key interest rates mean that gold will continue to witness higher prices.
Bank of America has predicted the price level will hit $3,000 per ounce by end of 2020, Citibank has projected $2,000 per ounce, and a number of international experts have predicted the levels will go up to $5,000 per ounce by 2022.
AO: And what about gold prices in the domestic market?
RH: Gold purchasing in the Egyptian market is a social tradition not an economic method, so if the prices hit EGP 2,000 or even EGP 3,000 per gram, the demand will still be high for investment gold..
But companies, big corporations and banks in the domestic market are expected to establish gold portfolios amid the current global challenges.
I think that companies in Egypt will tend to turn their funds to gold, especially as gold assets can be liquidated easily.
I can stress that gold purchasing will be an investment tradition at all levels in the Egyptian market as of 2020.
AO: In light of that, what about the Central Bank of Egypt’s gold reserves?
RH: The international reports that track the gold market around the world show that there is a significant demand for gold from the central banks of countries like China, Russia, India, Iraq, Pakistan and Qatar, especially amid the current crisis, while countries like Egypt, the UAE and Saudi Arabia are still behind.
Egypt must move towards increasing its gold assets, especially given that the global crisis is still ongoing and the COVID-19 pandemic is imposing a high uncertainty that makes the future of the economy and investment in the country unclear.