CAIRO: When things look up, gold goes down. Since the economic crisis deepened last fall this has mostly held true, including this Tuesday when gold slipped below $900 per ounce, down from a six-month high of about $993 per ounce last month, after global stock markets began to perk up. On Wednesday, gold closed around $900 per ounce. A surge in international prices since last fall was reflected in local markets, as jewelers and other gold buyers began to pay higher prices. [Local prices] are directly related to international prices, said Mahmoud El-Sirgany, vice president of Sherif El-Sirgany Jewelry. International prices dropped a few months ago, then they rocketed back. A gram of 22.5-carat gold traded for LE 166.58 ($29.37) - or $832.55 per ounce - in Egypt on Tuesday. An ounce of 21-carat gold sold for about $728.48, and 18-carat gold ran about $624.44 per ounce. International prices are calculated using ounces of pure gold, which is more expensive than the gold typically sold in local markets. Gold is a traditional haven for investors during times of uncertainty. Its price often moves in the opposite direction of the US dollar and in line with other commodities, such as oil. After the investment bank Lehman Brothers collapsed last September, gold shot up from just over $750 per ounce to over $900 per ounce. By October the price had started to slip again, bottoming out around $709 per ounce in early November, but had climbed back to its previous heights over the next few months as individuals and institutions moved back into gold. We haven t had such times of volatility and instability in a long time, said Angus Blair, head of research at investment bank Beltone Financial. Fear was the overriding factor in the purchase of gold. Global fluctuations in demand have forced jewelers to pay higher prices, even though jewelry demand does not sway gold prices, said El-Sirgany. It s all about economic reasons, he said. The jewelry market has nothing to do with it. Demand for high-end jewelry in general has eroded as the economic downturn has worsened. Many investors have turned to bullion and coins, Blair said. Central bank reserves are another factor in the global demand for gold. Until the collapse of the Bretton Woods system in 1971, gold was the standard reserve for most currencies, including the US dollar. Over the past few decades, many central banks have moved toward a broader mix of currencies. Many Arab nations central banks have held consistent gold reserves over the past 20 years because of an innate conservatism, Blair said. Lebanon, for instance, has the 17th most gold of any bank in the world. Egypt has the 36th most. While the economic crisis is likely to decrease the number of potentially gold-buying tourists in Egypt, this is not likely to have a major impact on local gold demand, market observers said. This is a global issue, Blair said. It is never a local or regional issue.
