Gold prices in Egypt could decline on high-yield CDs, geopolitical de-escalation: FEDCOC

Ahram Online , Monday 15 Jan 2024

The de-escalation in the conflict between Russia and Ukraine and the introduction of new high-yield certificates in Egypt could lead to a decline in gold prices, said Lotfi El-Monieb, deputy head of the Gold Division at the Federation of Egyptian Chambers of Commerce (FEDCOC).

Jewellery store in Egypt. Ahram Gate.
Jewellery store in Egypt. Ahram Gate.

 

Pricing of gold in Egypt rests on a set of factors including global pricing, the USD/EGP exchange rate, and the supply/demand dynamics, El-Monieb added in a statement sent to Ahram Online on Monday.

He noted that gold prices surged 255 percent since March 2022 due to the invasion of Ukraine, which led to a series of negative economic ramifications for Egypt, including the outflowing of short-term USD deposits, “hot money.”

Earlier in January, the National Bank of Egypt and Banque Misr announced issuing new CDs with 23.5 percent and 27 percent, respectively, annual yields.

Egypt is currently experiencing a severe US dollar liquidity crunch. Approximately $20 billion in hot money fled the local market as investors sought higher interest rates elsewhere.

The economic pressures led to a leap in the gold demand, which is the typical haven during such turbulences, El-Monieb explained.

On Monday, the purchase price of 24-carat gold reached EGP 3,749 per gram, while the global price reached $65.87.

Gold prices in Egypt surged by around 17 percent month-on-month in December 2023, and the gold pound coin reached an unprecedented level at more than EGP 26,000.

The global and local geopolitical tensions, coupled with expectations of interest rate cuts by the US Federal Reserve in 2024 and global shortage in US dollar reserves, have prompted investors to increase purchases of gold as a means to hedge against rising prices and global inflation.

As a result, gold prices reached an all-time high of $2,078 per ounce in 2023, representing a 15 percent year-on-year increase.

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