Despite a decline in global gold prices, its local price has remained high.

The global price of an ounce of gold recorded around $1,990 this week, after crossing the $2,000 per ounce mark last week, backed by strong US employment data issued on Friday. An ounce is roughly 28 grams, equivalent to LE2,170 a gram.

Locally, prices are much higher. The price of 24 carat gold has reached LE2,475 a gram, while the price of a gram of 21-carat and 18-carat gold recorded LE2,165 and LE1,855 respectively.

Local gold prices were affected last week by the issuance of two new three-year savings certificates by the National Bank of Egypt and Banque Misr, with the return on the first certificate reaching 19 per cent at a fixed return paid monthly, and the return on the second certificate at 22 per cent, a report issued by Egypt’s Gold Bullion said.

The report highlighted the Central Bank of Egypt’s decision last week to raise interest rates by 200 basis points on overnight deposits, reaching 18.25 per cent, and the lending interest rate stretching by 19.25 per cent, while the main interest rate reached 18.75 per cent, making the new rates the highest since July 2017.

Gold prices fell on the back of the announcement of the new certificates because a big portion of the liquidity was diverted to investing in saving certificates, said Amir Rizk, an expert on gold markets.

However, the extent of the decline in gold prices is weak compared to the extent of increase, reaching 32 per cent in March, Rizk pointed out.

However, Rizk is expecting gold prices to start rising again, especially with the advent of Eid Al-Fitr holidays, and the resumption of purchasing gold by many Egyptians. Many Egyptians schedule their weddings and engagements around the time of Eid, both events of which prompt gold purchases.

Hani Milad, head of the Gold Division at the Cairo Chamber of Commerce, said an unprecedented rise in global gold prices was witnessed recently, but that this was a natural result of global events and the banking turmoil in the US and parts of Europe, as well as other indicators that show an inability to curb inflation.

People resort to buying gold as a safe haven during uncertain economic times, Milad stated, adding that when people rush to buy gold despite high prices, they push its price higher. Nevertheless, he added, they should keep in mind that gold is a long-term investment.

Milad also said the gold market’s future is blurry, and that prices are witnessing a state of instability. The price of gold will witness more stability with any further devaluation of the currency, he explained.

There are voices describing the current prices of gold in Egypt as unfair and exaggerated, but Mohamed Adel, a gold trader, explains that the current local gold prices are fair given that imports have stopped and the demand for bars and gold pounds has increased. “With supply stopping, an increase in price was imminent,” Adel said.

Adel added that demand is higher for gold bars and pounds, as well as used jewellery, because their taxes and added expenses are lower, making them ideal for a later return on investment. Global gold prices and the local currency value against the dollar in the coming days and weeks will determine the short-term and medium-term prices of gold, he said.

The dollar currently stands at LE30.9, with the black market trading at around LE35.

* A version of this article appears in print in the 13 April, 2023 edition of Al-Ahram Weekly