Egyptian Gold Market Faces Volatility Amid Global Challenges, Currency Fluctuations

July 24, 2023


The Egyptian gold market has been undergoing significant changes over the past year and a half, witnessing fluctuations in supply and demand. As global challenges escalate due to the aftermath of the Russian-Ukrainian conflict, Egyptians seek safe havens for their money, increasing interest in gold.

For months, gold prices in Egypt reached unprecedented levels, driven by high demand amid the decline of the Egyptian pound against the US dollar. However, since June 13, a drop in gold prices has been observed, with a slight upturn during the current week.

This trend contrasts with the global market, where gold prices increased due to US inflation data.

As explained by Fady Kamel, CEO of Dahab Masr, the challenges faced by Egypt over the past 18 months, particularly the repercussions of the war in Ukraine, the scarcity of US dollars, and the ban on exporting certain commodities, have transformed the gold market into a closed one. Consequently, gold prices in Egypt are no longer directly linked to global rates.

Global uncertainties

As the global economic landscape continues to evolve, the Egyptian gold market faces uncertainties and shifts in response to domestic and international factors. Since March 2022, the Egyptian pound has experienced three depreciations against the US dollar, with two devaluations occurring since the beginning of 2023. This has resulted in the Egyptian pound losing over 75% of its value against the greenback, trading at nearly EGP 31/1 USD, compared to the pre-Ukrainian war breakout level of over EGP 15/1 USD.

Despite these economic challenges, Egypt remains fully committed to the International Monetary Fund (IMF) under an ongoing $3 billion deal approved in December. To support the gold industry, the country has taken various measures through the government and private sector to bolster the sector’s resilience.

One such action is the exemption of travelers carrying gold from customs duties and related fees while retaining the VAT tax. This regulation, effective for six months since May 11, has attracted over 194 kilograms of gold into the market, as reported by the Egyptian Customs Authority (ECA).

Fady Kamel, CEO of Dahab Masr, highlighted the positive impact of this decision on the local gold market, contributing to a recent decline in gold prices. However, he acknowledged that the quantity of gold entering the market due to this regulation (estimated at 200 to 220 kilograms) has not significantly affected the overall supply, considering that the local gold market recorded 7 tonnes of gold in the first quarter of 2023, according to the latest report from the World Gold Council.

Despite the current challenges, Kamel predicts that gold prices in Egypt will rebound by the end of the year, surpassing EGP 2300 per gram for 21-karat gold, mainly driven by projected global price increases. As the Egyptian gold market navigates through economic fluctuations, efforts to stabilize and support the sector remain crucial.

Jewelry exports

Egypt’s jewelry and precious stones exports experienced a sharp decline during the first five months of 2023, dropping by 45% to a value of $425 million, compared to $766 million recorded in the corresponding period of 2022, as reported by gold investment company Gold Bullion.

The significant drop in exports is primarily attributed to weak global demand for gold during the first half of the year, with investors shifting their focus to the low-risk bond market due to the prevailing global gold prices. Additionally, high-interest rates have diminished the appeal of gold as a haven for individual and institutional investors, further contributing to the decrease in Egypt’s gold exports.

Speaking to Business Monthly, Sameh Eltorgoman, CEO, and Founder of Evolve Investment Holding, highlighted the lack of a sound ecosystem in Egypt’s gold market over the years. Such an ecosystem is essential to connect the strategic investment sphere to the global gold market, particularly concerning prices.

To bolster the gold investment landscape in Egypt, Evolve Investment Holding and Egyptian asset manager Azimut launched the first gold investment fund, “az Gold” in the Egyptian market. The fund’s key function is to invest in 24-carat gold bars and issue investment certificates starting from EGP 10, which will be available for sale at post offices.

The launch of “az Gold” received an overwhelming response, with the initial subscription period concluding with EGP 152.8 million in subscriptions, oversubscribed by 15 times, with over 7,000 investors participating. Eltorgoman emphasized that the fund aims to establish a solid ecosystem for gold investment in Egypt, which ranked third globally among the top three countries in terms of gold purchases in 2022 and the first quarter of 2023, according to a report issued by the World Gold Council (WGC).

To strengthen the gold investment infrastructure, Dahab Masr partnered with EgyCash, a company established by the Central Bank of Egypt in 2020. This collaboration facilitates money transfer solutions, ATM cash feeding, and custody services for precious metals, including gold, for its clients.

Furthermore, Dahab Masr partnered with a digital payment provider, offering an online gold investment app named “Yalla Invest.” This platform enables users to purchase and invest in gold in amounts as small as 0.25 grams, making gold investment more accessible through digital payment solutions.

Despite the challenges Egypt’s gold market faces, efforts to build a robust investment ecosystem and embrace modern financial solutions aim to revitalize the sector and attract more investors in the coming periods.