What is causing turmoil in Egypt's gold market? Official answers

Asmaa Mostafa , Sunday 28 Jan 2024

Egypt's recent gold market crisis could be attributed to a significant disparity between supply and demand, fueled by an overwhelming demand for profit, said Ihab Wassef, head of the Gold and Precious Ores Division at the Federation of Egyptian Industries.

File Photo: A shop window of jewellery store in one of the streets of Cairo, Egypt. Al-Ahram
File Photo: A shop window of jewellery store in one of the streets of Cairo, Egypt. Al-Ahram


The prevailing gold prices are unjustifiably high, resulting from surging demand aimed at maximizing profits and a reluctance to sell in anticipation of further price increases, Wassef told Ahram Online.

Over about a month, the purchase price of 21-carat gold has soared by 21.5 percent (or EGP 675), reaching EGP 3,825 compared to EGP 3,150 on 1 January, with the gold pound surpassing the EGP 30,400 mark for the first time.

Wassef added that gold prices are influenced by global precious metal prices, the exchange rate between the Egyptian pound and the US dollar, and supply and demand dynamics.

When asked about the recent instability of the Egyptian pound against the US dollar and its role in the gold market crisis, Wassef asserted that the primary catalyst for the crisis lies in the intense demand for gold amid a scarcity of supply.

Currently, the USD is being traded at over EGP 60 in the parallel market, while the official exchange rate remains at nearly EGP 31 per dollar.

Urging citizens to refrain from purchasing gold during this period, Wassef called for a return to normal price ranges.

Notably, the price of 21-carat gold surged by EGP 275 in a single day, specifically on Friday.

These fluctuations came in the wake of local reports circulating about the arrest of several prominent gold and jewelry merchants in Egypt, followed by the indefinite suspension of the iSagha gold and jewelry trading platform.

The trading suspension on the iSagha platform occurred due to a severe crisis and substantial increases in precious metal prices resulting from price manipulation, said Saied Embaby, the platform's CEO.

Wassef concluded that Egypt's demand for gold recorded around 46.2 tons during the first nine months of 2023, up from approximately 30 tons in 2022, as a result of increased geopolitical tensions and the recent economic crises.

Global scope

Globally and domestically, the gold market has experienced a surge in demand from investors seeking to safeguard their wealth in safe-haven assets amid worldwide crises, geopolitical tensions, the depreciation of the US dollar index, and anticipation regarding the policies of global central banks, particularly the US Federal Reserve, regarding a potential reduction in interest rates during the first quarter of 2024.

On Sunday, the price of gold reached $2,037.10 per ounce, up from $2,017.80 per ounce on Friday, as investors turned their attention to the upcoming policy meeting of the US Federal Reserve, seeking further insights into the future outlook for interest rates, according to Trading Economics.

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