Although for now gold looks like the safest investment, experts believe there is profit to be made elsewhere as well, writes Niveen Wahish August saw gold prices hit a new height of $1,800 per ounce globally. Although this week it fell slightly, it stayed in the range of $1,740 per ounce. The rush for gold came on the back of investors' concern for the global economy following the US credit rating downgrade, as well as investor anxiety over Europe's worsening debt crisis. They rushed to buy gold as a safe haven. "Gold will continue to go up in value as long as the US continues its policy of quantitative easing (QE) and the interest rate is at zero per cent," says Hani Tawfik, chairman of the Arab Union for Venture Capital. QE describes a form of monetary policy used by central banks to increase the supply of money in an economy out of nothing. He believes that it is never too late to seek a safe haven in gold. "When gold was at $1,000 per ounce, investors were asking whether they should buy or wait until the price decreases. Today I am getting the same question," he said. "Gold can only go up as long as the global economic situation does not change." And that does not appear to be happening any time soon, says Rafeek Abassy, head of the Goldsmiths' Division at the Federation of Egyptian Industries. He pointed out that compared to August 2010, gold is up around 30 per cent. It was selling for $1,200 per ounce last August. In fact, he said that those who chose to invest in gold have not gone wrong. The precious metal has been rising in value by around 25 per cent annually over the past 10 years. The Global Demand Trends published by the World Gold Council showed that gold demand in the first quarter of 2011 totalled 981.3 tonnes, equivalent to $43.7 billion. "Much of the 11 per cent year-on-year increase in tonnage demand was the result of strong growth in investment demand. Demand for physical bars and coins was up 52 per cent year-on-year, at 366.4 tonnes. In value terms, this represented a near doubling of demand from $8.6 billion in the first quarter of 2010 to $16 billion." That increase, however, has not been very positive for the local industry. "The more expensive it becomes, the less customers we get." Now, Abassy says, there is a slowdown in the gold market. "We get a lot of people selling gold to gain much needed cash for their families. Only a minority is buying it as jewellery." In fact, the Global Demand Trends showed that in the first quarter of 2011, Egypt was very much affected by the domestic events and gold jewellery volumes plummeted. "First quarter demand fell 39 per cent to 10.9 tonnes as high prices and concern over the unfolding events prompted a wave of recycling activity," the report said. Nonetheless, Abassy said there are those who want to put their savings in gold and are buying gold coins and bars. But Mohamed Hegazy, professor at the Faculty of Commerce, Cairo University, does not like to put all his eggs in one basket. He says that buying gold requires an expert who can follow up the market closely to be on the alert should the price drop. Likewise, Mohamed Maher, CEO of Prime Holding believes that placing too much of one's investment in gold in Egypt may not be very practical. "Keeping it at home could have its security setbacks and keeping it at the bank comes at a price." Hegazy believes that the Egyptian stock market nowadays holds some good opportunities because share prices are low. However, he says investors have to be patient for at least six months before they can make some capital gains. Long-term certificates of deposits at banks are another option, he says, because they are safe and the return on investment is reasonable. Interest rates range around nine per cent for three-year certificates. He also says that banks are always a safe choice because central banks always guarantee their deposits. Maher, too, believes bank deposits are a safe choice considering that the interest rate is relatively high. That has kept Egyptians from dispensing of their pounds and has protected the pound from sharp depreciation. Real estate is another good investment, Hegazy says. The return on investment is high and very safe. And with Egypt's burgeoning population, the need for housing is unquenchable. The downside, he says, is that it requires a large sum of money upfront and it is difficult to liquidate should one need the money. Hegazy also recommended that now is a good time to slowly begin initiating well studied manufacturing or tourist projects. "The land can be acquired at a reasonable price, the price of machinery can be negotiated and labour is abundant. By the time things are back to normal, these projects will take off," he said.
