Gold Prices Surge in Egypt Amid Monetary Tightening Policies

Since March 2022, gold prices in Egypt's local markets have seen a dramatic increase of approximately 250%, while global market prices for an ounce of gold rose by 7.3%. This surge followed the U.S. Federal Reserve's decision to implement monetary tightening policies to curb inflation, which included raising interest rates 11 times over two years, reaching a peak between 5.25% and 5.50%.

Saeed Embabi, the CEO of the online gold and jewelry trading platform "iSagha," noted that gold prices have climbed by about 2088 EGP since March 2022. The price of a gram of 21-karat gold opened at 837 EGP at the start of March and peaked at 4000 EGP in January 2024, marking the highest local rate ever recorded, and closed at 2925 EGP at the end of February 2024. Concurrently, the ounce price in the global market increased by approximately 140 USD, opening at 1905 USD in March 2022, reaching an all-time high of 2152 USD in December 2023, and closing at 2045 USD at the end of February 2024.

Embabi explained that the Federal Reserve's initiation of the monetary tightening cycle and interest rate hikes impacted emerging markets, including Egypt, leading to an exodus of hot money and prompting the Egyptian government to raise interest rates by 13% to reach 21.25%, 22.25%, and 21.75%, respectively.

Additionally, the Central Bank of Egypt decided to float the Egyptian pound twice in 2022, in March and October, resulting in a 57% depreciation of the pound in official banks before another floatation in January 2023. This led to instability in the dollar exchange rate over two years, widening the gap between the official and parallel market rates by about 100%. The gold market experienced confusion and manipulation by some raw gold traders, prompting "iSagha" to suspend pricing on multiple occasions to avoid contributing to the depletion of citizens' savings.

Embabi anticipates a period of stability and decline in exchange rates and gold markets in the upcoming period, aligned with the state's plan to boost foreign currency through investment deals, including the "Ras El Hikma" deal, and the state's partial or complete withdrawal from economic activities to enhance the role of the private sector and foreign investments.

During February's transactions, gold prices fell by 1075 EGP, with the price of a gram of 21-karat gold opening at 4000 EGP, touching a low of 2880 EGP, and closing at 2925 EGP. In the global market, gold prices decreased by 11 USD, with the ounce opening at 2056 USD, reaching highs of 2066 USD and lows of 2017 USD, and closing at 2045 USD.