Local gold prices nosedived on both Saturday and Sunday, and while they showed some recovery on Monday morning, they ended the day on the losing side. The declines came as the international prices of the yellow metal dropped as global markets tried to digest central bank moves to cut interest rates in a measure aimed at pushing economies forward amid the chaos caused by the spread of the new coronavirus. This week's decline is the opposite of what was the case in the first half of March, when local gold prices reached their highest level in 2020 soon after the US Federal Reserve made an unscheduled 0.5 per cent cut in interest rates on 3 March, the largest since the 2008 financial crisis. On 15 March, the Federal Reserve again cut interest rates by one per cent to a range of 0.00 to 0.25 per cent. Local gold prices on Monday came in at LE682 per gram for 21 karat gold and LE585 for 18 karat gold. This is compared to LE731 and LE617, respectively, soon after the Federal Reserve's first cut two weeks ago. This decline is due to what Ehab Wassef, deputy head of the Gold Division at the General Union of Chambers of Commerce, called a “state of panic” taking place in the international markets due to the spread of the new coronavirus, as people begin to cash in their investments. Wassef believes that local gold prices will soon recover as gold is a safe haven in times of crisis. He said that the local stock market was losing ground and had recorded LE9 billion in losses on Sunday. The interest rates offered by the local banks of between 10 or 11 per cent also encouraged people to keep their money in bank accounts, he said. But since 1981, local gold prices have shown an annual increase of 26 to 34 per cent, he said. The only exception was in 2015, when due to the pound's flotation gold prices increased by 257 per cent. “I don't think any other kind of investment would give you similar profits,” Wassef said. Hossam Abdel-Ghani, an economics lecturer at Helwan University, shared a similar perspective. He said that the recent decline in prices had come due to people selling their gold to make a profit after prices jumped in early March, wanting to have enough cash to buy food products amid the coronavirus crisis. The US Federal Reserve's recent moves will play a role in increasing the international prices of gold and the demand for it, Hossam argued. “The European Union will likely also reduce interest rates, especially after Brexit, to face a recession and a retreat in industrial and trade growth and to encourage people to invest,” he commented. Hossam added that these developments would possibly encourage people to buy gold, which would lead to an increase in both its international and local prices. *A version of this article appears in print in the 19 March, 2020 edition of Al-Ahram Weekly
