With Egypt’s gold prices witnessing a sharp increase since the beginning of this year, the demand for gold has dropped considerably.
“The price of gold has soared in line with the price rise of petroleum due to political conditions in Arab countries, especially Libya,” says Abdel Salam Mohamed, Zamalek branch manager of Al-Mawardy, a popular jewelry store with a number of branches in Cairo. He added that the removal of the ban on gold exports has also contributed to the price hike.
The Minister of Trade and Industry Samir Sayyad issued a decree banning the export of gold from 27 February in an effort to prevent corrupt officials and businessmen from smuggling their wealth out of the country.
However, on 10 April, the government lifted the ban early due to increased political stability and the reopening of the stock market, which came after more than seven-week suspension. Originally, the ban was supposed to remain in effect until 30 June.
With exports permitted, the price of 21-carat gold rose from LE227 to LE247, 18-carat from LE194 to LE211 and 24-carat from LE252 to LE281 on 11 April.
Mohamed explains that local gold prices continue to increase due to the heavy investment in gold indexes. “After the unstable political condition in Arab countries, which led to considerable increase in petroleum price, people started to invest their money in gold indexes,” said Mohamed. Consequentially, the uprising that swept Arab nations is considered an aggravating factor in the sharp fall in the demand for gold.
“I always tend to transfer money to gold because its price is continuously rising,” says Tahany Ismail, a housewife who used to buy gold as an investment because it provides her a sense of security in case she faces cuts in family earnings.
Ismail believes that this is the best way to make a small amount of money grow to significant sum over time. However, she has refrained from buying gold during the recent period because prices are high, she says.
The shabka (wedding ring) cost has also been affected by rising prices. “Most clients come to ask about wedding ring prices because they are constrained by a tight budget due to financial circumstances,” says Sherif Antoun, a jeweler.
“A bride could buy a 24-carat shabka at a reasonable price ten years ago. But now two simple gold wedding rings cost a lot,” says Hussein Abdel Hamid, a 28-year-old employee in computer company. “I hope that after the revolution, prices will decrease because marriage expenses and dowries are already a burden on young people who want to get married.”
Antoun says that another factor contributing to the low demand in gold is that wealthy women prefer a diamond wedding ring instead of gold shabka.
Nevertheless, despite the recent high prices of gold resulting from a lift of the export ban, Mohamed sees that renewing international trade in gold with Egypt will have a positive impact on Egypt’s economy in the long run.
Egypt’s gold market was paralyzed over the last couple of months, as most of the materials used in manufacturing chic gold ornaments are imported from abroad.
“The gold prices will not be stable until the current situation in Arab countries stabilizes,” said Mohamed. “Hopefully, it won’t witness a further rise.”