Already at all-time highs, the price of gold has nowhere else to go but up, writes Rehab Sayed Ahmed The value of gold reached unprecedented highs this month at $1,000 an ounce, since the record high of $850 per ounce in 1980. The Egyptian market is feeling the pinch, most obviously when grooms no longer go all out when buying the shabka (engagement gifts) for their brides. "Gold jewellery retail has depressingly degenerated because of soaring prices," complained Mohamed Hassan, a jeweller. "People are not even willing to buy [complete sets of] wedding gifts any more, but settle for two wedding rings and an extra ring for the bride." Hassan foresees worse times ahead for his trade in light of continued price hikes of basic commodities and gold. Sami Salah, owner of a jewellery shop, said that there has been a massive hike in gold prices. Today, 21 karat gold has gone up to LE156 per gramme from LE135; 24 karat gold is now LE175 per gramme, up from LE154.28; 18 gold karat sells for LE134 per gramme, in comparison to the previous LE115.71. The price of a gold coin, which weighs eight grammes, has climbed from LE1,064 to LE1,280. Experts say the upward spiral will continue. "Further price climbs are yet to come," predicted Mohamed Hanafi, general manager of the Chamber of Metals at the Egyptian Federation of Industries. "Prices might exceed reasonable expectations to reach $2,000 or $3,000 per ounce because of the current international economic situation." After a 30 per cent surge in 2007 which pushed prices up to $630 an ounce, gold was selling at $866.9 per ounce during the first trading week of 2008. Two years ago, the value of gold was less than $550 an ounce and about $350 five years ago. Historically, however, gold has been unable to keep up with inflation. When the economy ends its current downturn, gold prices should ultimately descend as they did 28 years ago. After hitting the $847 threshold in January 1980, gold prices fell by 70 per cent to $253 in August 1999. And it doesn't seem that Egypt's huge gold reserves could soften the effects of these hikes on the local market. Yasmine Youssef, a technical jewellery expert at the Industrial Modernisation Centre, does not believe that goldmining at Safaga in the Eastern Desert will help bring down local prices since the extracted gold will be sold on international markets at world prices. Hanafi explained that economies across the globe are adversely affected by a slowdown in the US economy because of recession. This is accompanied by declining stock prices which led to panic sell-offs of equity and a series of cuts in interest rates on cash deposits. "Moreover, in light of the increase in oil prices to reach $110 per barrel for the first time ever, investors around the world found their refuge in buying precious metals, at the top of which is gold," he added. Hani Milad, secretary-general of the Jewellery Division in the Egyptian General Association for Chambers of Commerce echoed Hanafi's opinion. "There is an international trend to swap US dollars for gold since, unlike the dollar, the value of gold increased and caused an unprecedented boom in gold prices," according to Milad. He further elaborated that there is a reverse relationship between the US dollar and gold: "Currently, the dollar is at its lowest level in 12 years, versus the Yen, and is losing ground to the Euro," Milad pointed out. "While that's bad for US investments, a weak dollar raises the value of gold." The escalating demand on gold from investors, especially central banks in China, Russia, India and Arab countries, has pushed up the bidding prices offered by industrial users and jewellery manufacturers. Furthermore, China has a huge cash surplus resulting from its increased growth rates and is implementing a plan to create demand for millions of ounces of gold every year, for years to come, according to Effat Abdel-Hamid, a socio-economist.