Global gold prices rose to an all-time high on Monday, trading at above $2,000 (about LE32,000) per ounce and pushed up by concerns over the global economy as coronavirus cases continued to rise and with a weakened US dollar. The prices of gold in Egypt also saw a record rise, on Tuesday reaching LE754 per gram of 18-karat gold and LE880 and LE1,005 per gramme of 21 and 24-karat gold, respectively. The US dollar weakened against other currencies at the end of July following a sharp increase in US coronavirus cases and flare-ups of cases around the world supporting the rally in gold prices. The average price of the dollar against the Egyptian pound was down by about 15 piastres at the banks in July trading, according to Central Bank of Egypt (CBE) data. The average price of the dollar was LE15.93 for purchase and LE16.03 for sale at the end of July, compared to LE16.08 for purchase and LE16.18 for sale at the end of June. The fall in the US currency coincides with a return to investment in debt instruments by foreign investors after this had witnessed a sharp decline after the beginning of the Covid-19 crisis. An agreement with the International Monetary Fund (IMF) on funds worth $8 billion under its rapid finance instrument and stand-by agreement, as well as on international bonds worth $5 billion, has helped Egypt to secure its needs for foreign exchange and alleviated the severity of the coronavirus crisis. Egypt's foreign reserves had increased by the end of June for the first time since March to reach $38.2 billion after falling from $45.5 billion in February to $36 billion in May, losing about $9.5 billion. According to a recent Gold Demand Trends report from the World Gold Council, the global response to the Covid-19 pandemic on the part of central banks and governments in the form of rate cuts and massive liquidity injections fueled inflows into gold-backed exchange-traded funds in the first half of 2020 by a record-breaking 734 tons and lifted global holdings to 3,621 tons. Experts believe that gold prices will continue to rise at unprecedented rates amid soaring global demand due to the economic turbulence caused by the coronavirus pandemic as well as the current trade feud between the United States and China. “Now is still the appropriate time to invest in gold, as it is better than investing in currencies,” said Rafik Al-Abbasi, head of the gold division at the Metallurgical Chamber of the Federation of Egyptian Industries. “Gold is a safe haven for government institutions and a way to preserve the value of savings,” he said, adding that more and more people who had had shares and bonds were now selling them to invest in gold instead. Investment in foreign currencies like the US dollar and in real estate and stocks was declining, Al-Abbasi said, and investors were looking to secure their assets by investing in gold as a safe-haven investment in an unstable market situation. Governments and banks were also investing in gold. “Gold is on a permanent rise, while foreign currencies are not,” he said. Al-Abbasi said that sales in the domestic market depended on purchasing decisions made by the middle classes, adding that the current high prices had heavily impacted sales during the Eid holidays, dropping by about 70 per cent compared to last year's season. The demand for gold and jewellery in Egypt decreased during the second quarter of this year by 70 per cent to reach 1.7 tons of gold compared to 5.5 tons during the same period in 2019. It decreased by 75.3 per cent during the second quarter compared to the first quarter of 2020, when it amounted to 6.9 tons, according to the World Gold Council.
*A version of this article appears in print in the 6 August, 2020 edition of Al-Ahram Weekly
