Gold: That which glisters is a safe bet

In time of war, gold is a safe bet. The yellow metal is also a hedge against inflation, no matter what happens to the local currency.

Such is the accepted wisdom wheeled out by Lotfi El Menyeb, Deputy Head of the Gold Department of EFG Holdings, who affirmed that the pricing of gold in Egypt depends on specific factors, including the correlation of the gold ounce price with the US dollar in the global market and its impact on the Egyptian pound. Additionally, he mentioned the mechanisms of supply and demand in the local market and the ability to compensate for the quantities sold and required in the local market from global markets, which necessitates the availability of dollars for import and procedures allowing importation.

El Menyeb noted that the years 2022-2024 marked the beginning of implementing import restriction decisions to address the crisis resulting from the shortage of our foreign currency resources.

This was accompanied by the outflow of short-term dollar deposits, known as “hot money,” from Egypt, in addition to the devaluation of the pound against the dollar.

He noted that this period witnessed significant and intense fluctuations in gold prices.

El Menyeb predicted that the conclusion of investment certificates in banks this month was met with the banks issuing other certificates, which are the highest in history.

This is due to the government’s desire to control those funds, amounting to billions, which, if withdrawn, would have been directed to buying gold, causing a significant increase in demand for the yellow metal, exceeding the available quantities in the Egyptian market.

He asserted that the banks targeting the issuance of additional certificates is a governmental direction to curb inflation in the markets, in line with the state’s decision to prohibit banks from accepting undisclosed dollars in an attempt to eliminate currency trading and the black market.

Additionally, the practical implementation of Egypt’s entry into the BRICS group, where countries deal with their currencies rather than the dollar, may lead to a reduction in the value of the dollar against the pound.