Expert: Demand Stagnation and Rising Costs Threaten the Egyptian Gold Industry

Emad Saad, an expert in gold markets, stated that the trade of raw gold and gold transfers represents a fundamental pillar in Egypt's gold trading system, acting as a "parallel banking system" within the market. In this system, the merchant purchases the same number of grams of raw gold from manufacturers in exchange for paying the craftsmanship/labor cost (masna'eya) in cash.

He added that gold is the merchant's true capital, so they are keen to immediately replace what they sell to ensure the stability of the commercial cycle. He noted that the raw gold trade serves as the financial intermediary between manufacturers and retailers.

Gold Recycling and Sales Decline

Saad explained that used jewelry (al-kasr) resulting from citizens reselling their ornaments is remelted and used as new raw material. This contributes to the supply of local raw materials and reduces the need for imports.

However, he pointed out that the historic rise in prices—with 21-carat gold exceeding the EGP 5,700 barrier—has led to a sharp drop in demand in the jewelry markets and a decline in sales, even during busy seasons like holidays and weddings.

Factories Bear the Burden to Retain Labor

Saad said that factories are facing a suffocating financial crisis due to weak demand and the rising costs of operation, electricity, fuel, and raw materials. Nevertheless, they are compelled to retain skilled labor to maintain production quality and the reputation of the Egyptian industry, emphasizing that losing these cadres is an irreplaceable loss.

He called for government support, including reducing tax burdens and facilitating exports to foreign markets to overcome the local stagnation.

Record Prices and a Global Upward Cycle

Saad indicated that the rise in prices locally and globally is driven by several factors, most notably geopolitical tensions, central bank purchases, and declining confidence in the dollar, explaining that global prices have risen by more than 53% during the year.

He added that the Egyptian market is affected by three main factors: the global price of the ounce, the local exchange rate of the dollar, and the levels of supply and demand.

Rising Craftsmanship Costs and Changing Purchase Patterns

Saad explained that companies raised the masna'eya (craftsmanship/labor cost) by an average of EGP 15 per gram to counter rising operating costs, which increased the final cost to the consumer by EGP 60 to EGP 200 per piece.

He said that this trend did not reduce the interest in gold but rather encouraged some buyers to turn to bars and gold pounds to mitigate the impact of the masna'eya.

He clarified that the masna'eya has increased by 20–30% since the beginning of the year, while its percentage of the total price has dropped from 10% to only about 3%, shrinking the profit margin for factories.

Difference in Tastes and Market Diversity

Saad noted that current demand is 90% focused on bars and gold pounds, while the interest in traditional jewelry has decreased. He explained that manufacturers have turned to producing lightweight pieces ranging between 5 and 30 grams to suit limited purchasing power.

In contrast, demand from tribes and Bedouins in Matrouh, Sinai, and the Oases for heavy sets and 24-carat gold has increased, pushing companies to develop new production lines that suit the tribal taste.

Confidence in Gold Remains

Saad stressed that the Egyptians' connection to gold is culturally and socially rooted; it is a symbol of both marriage and saving. He pointed out that confidence in the precious metal has increased with the decline in the local currency's value, and gold has become the true safe haven for preserving value.

He predicted a continued upward trend in prices in the medium term, with a gradual return of local demand as incomes improve and the exchange rate stabilizes.

He concluded by saying that gold will remain the safest long-term investment, advising the purchase of 24-carat bars to reduce the masna'eya, while 21-carat gold pounds remain the popular option that is easiest to buy and sell.

He called for continued government support for the industry and the provision of facilitated financing to factories so that the sector can recover and ensure the sustainability of one of Egypt's most ancient heritage industries.