CAIRO: The price of gold recovered modestly on Monday to nearly $800 per ounce following a long tumble from the heights it reached last March, when it hovered above $1,000 per ounce. Meanwhile, a World Gold Council (WGC) report issued Sunday showed demand for bullion slumping in many Middle Eastern markets over the second quarter of 2008, while holding strong in Egypt, where it shot up 9.8 percent by 14.6 tons. Yet this report conflicted with mumblings in the local market, where some worried the lower international prices could hamper business at home. "You might think when prices are higher, demand goes down, said Mahmoud El Sirgany, vice president of Sherif El Sirgany Jewelry. "This is not always the case. It is a strange market. People treat gold of all types as an investment, El Sirgany said, and so when it is costly, they tend to trust in it and buy more, hoping to make more money. This leads to something of an inverse of traditional models of cost and demand. In the Egyptian jewelry business, global gold price jumps are seen as favorable, despite the fact that making the jewelry is more expensive, El Sirgany said. As prices soared four weeks ago, the market was buzzing, he said. "Now the market is going down - khalas - it's dying. The WGC and other analysts credited the on-paper rise in Egypt's demand this past quarter to worries over inflation with the Egyptian pound, prompting some to move to gold as a steadier investment. The WGC also predicted that demand for gold in Egypt would rise over the next five years at least, as tourism and the economy continue to thrive. Privately, some local sellers are less sanguine, pointing to the large percentage of the gold market that went unregistered until recently. A burst of registration can create the illusion of a rocketing market even if it is in fact slowing. But there have been plenty of signs suggesting growth in recent years. The gold market in Egypt is divided roughly into four sectors, El Sirgany said: 21-carat gold, 18-carat gold, tourism and diamond jewelry, which uses gold for settings. Each sector has a unique set of demands and costs. Tourism-related sales, for one, depend heavily on the number of tourists who frequent hubs like Luxor and Sharm El Sheikh, where much of the industry is based. The 18-carat market has changed significantly in the past decade, El Sirgany said. As consumers have become worldlier through exposure to satellite television, the internet and global brands at CityStars Mall and similar outlets, they have grown more sensitive to design. This has led to three or four design companies sprouting in Egypt per year, El Sirgany said. The diamond jewelry market has also been affected by this rise among local designers, as well as the opening of several new factories. Ten years ago, 80 percent of his goods would have involved imports, El Sirgany said. Now he estimates it is no more than 10 percent.
