The relationship between Egyptians and gold is not limited to economic aspects, but extends deep into history and culture. They view gold as a safe haven in times of crisis, and a symbol of wealth and financial stability. This emotional connection between the people and the precious metal gives the effects of exchange rate liberalization a special character that can also be taken into account when determining the most likely trends for the prices of the precious metal.
I witnessed gold prices Huge increases in previous periods, driven by the rise in the price of the dollar in the parallel market, but the slowdown in this increase came after recent government decisions and steps. Among these steps was the announcement of the Ras El Hekma project, which is considered the largest foreign direct investment in the history of Egypt.
In light of these transformations, everyone is wondering about the future of gold prices in Egypt. Will it witness a decline as a result of the liberalization of the exchange rate, or will it continue to rise to prove itself as a safe haven that maintains its attractiveness in light of economic transformations?
Understanding future trends in gold prices requires an analysis of general economic conditions in Egypt, while considering how local and international markets will respond to these shifts. While Egyptians and investors await the future of this important market with optimism and caution at the same time, wondering where future transformations will direct them?
unclear vision
For his part, a member of the Gold Division of the Federation of Industries, Engineer Rafiq Abbas, indicated in exclusive statements to the “Eqtisad Sky News Arabia” website that:
- Determining the price of gold and its basic trends in Egypt during the next stage is still difficult to predict.
- The vision is still unclear in light of the instability of the dollar price level so far following the liberalization of the exchange rate.
- Determining gold prices requires stability in the dollar exchange rate levels in light of the link between gold in Egypt and the dollar.
He stresses the need for the dollar to be available at the declared prices. It even supports the ability to determine gold trends and pricing levels.
A member of the Gold Division in the Federation of Industries pointed out that if the dollar stabilizes at the levels of 50 pounds, the matter requires the availability of the dollar currency in the event of demand at these levels in order for price trends to become clear in the coming period.
Failure to make the dollar available to dealers would push the parallel market to return to activity again, after the strong blow it received beginning with the announcement of the Ras al-Hikma project and then the announcement of the recent decisions related to raising interest rates in an extraordinary emergency meeting of the Central Bank, and liberalizing the currency price according to supply and demand mechanisms.
According to the latest gold price update, on Thursday afternoon, 24-karat gold recorded about 3,657 pounds, 21-karat gold recorded 3,200 pounds (compared to 3,500 pounds in the week before the announcement of the Ras al-Hikma project), and 18-karat gold recorded 2,743 pounds (compared to 3,000 before the project). The gold pound also recorded 25,600 pounds.
The Central Bank of Egypt’s Monetary Policy Committee raised the overnight deposit and lending rates and the central bank’s main operation rate by 600 basis points to reach 27.25 percent, 28.25 percent, and 27.75 percent, respectively.
The Central Bank of Egypt also decided to raise the credit and discount rates by 600 basis points to reach 27.75 percent. This was held at an extraordinary meeting of the Monetary Policy Committee.
Safe haven in the medium term
For her part, Hanan Ramses, a member of the Board of Directors of Al-Hurriya Securities Trading Company and financial markets expert, points out in exclusive statements to the “Eqtisad Sky News Arabia” website that:
- Gold prices globally are linked to the US Federal Reserve’s decision regarding interest rates. In theory, the trend is towards raising interest rates. Gold prices tend to decline due to that trend’s support for the strength and position of the dollar, and vice versa.
- Gold globally recently closed at levels above $2,100 per ounce, supported by the statements of US Federal Reserve Chairman Jerome Powell and signals related to maintaining tight policies for a longer period than market expectations.
- It is expected that the coming period, specifically the second half of this year, will witness the start of the interest rate reduction, and then gold will reach the level of $2,500 per ounce with the adoption of the interest rate reduction policy.
Regarding Egypt, Ramses pointed out that gold prices vary greatly in general and in detail, in light of its connection to the price of the dollar in the parallel market, which had reached levels of 70 pounds per dollar.
It explains that with the state’s liberalization of the exchange rate, and with the entry of dollar proceeds from the Ras al-Hikma deal last period, gold prices declined temporarily, then recovered due to hedging against the lack of clarity of vision and whether the parallel market will be eliminated and whether this will be successful or not.
It is expected that gold will witness an increase in the short and medium term in light of the entry of new seasons, such as holidays and the demand to buy gold jewelry, in addition to its role as a more stable safe haven for many, even in light of raising interest rates to hedge against the risks of inflation. It is expected that gold will reach the level of 3,000 pounds per karat. 21.
liquidity
It is noteworthy that Egypt is witnessing dollar inflows that help it bridge the financing gap, which was an intractable problem for the economy. Among those flows is $10 billion in the government’s possession now from the Ras al-Hikma deal. Meanwhile, the International Monetary Fund agreed, on Wednesday, to increase the value of Egypt’s loan to $8 billion, from $3 billion, which had been agreed upon in December 2022.
According to Prime Minister Mostafa Madbouly, signing the agreement with the IMF will allow the Egyptian government to apply for an additional loan worth $1.2 billion from the Environmental Sustainability Fund of the International Monetary Fund, bringing the total to about $9 billion.
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