Lotfy Moneeb: Gold Has Not Lost Its Investment Appeal as Current Prices Reflect the Removal of the “Fear Premium”

CAIRO – Gold remains one of the safest long-term investment assets despite the sharp correction witnessed in recent months, according to Eng. Lotfy Moneeb, Vice Chairman of the General Gold Division at the Federation of Egyptian Chambers of Commerce. He stressed that the recent decline should be viewed as a natural price correction following an exceptional rally fueled by geopolitical tensions and global uncertainty, rather than a sign that gold has lost its status as a safe-haven asset.

Moneeb said many investors mistakenly believe that gold has erased all of its gains. However, he explained that the correct benchmark is the beginning of the current rally in January 2025, when gold was trading at around $2,700 per ounce following the inauguration of U.S. President Donald Trump for his second term. Today, despite retreating from its historic peak, gold still trades above $4,100 per ounce, meaning investors who entered the market at the beginning of the rally are still sitting on gains of nearly 50%.

He noted that the extraordinary surge that pushed gold above $5,600 per ounce was driven less by traditional supply-and-demand fundamentals than by what he described as the market's "fear premium."

"The market priced in the worst-case geopolitical scenarios," Moneeb explained. "Concerns over escalating wars, trade tariffs, supply-chain disruptions and global economic instability encouraged investors worldwide to shift away from risk assets and increase their exposure to gold."

According to Moneeb, markets have since reassessed those risks as many of the feared scenarios failed to materialize. The anticipated large-scale geopolitical escalation did not occur, energy supplies continued to flow, and global trade remained largely intact.

"As those fears gradually faded, the premium that had been built into gold prices also began to disappear," he said. "What we are witnessing today is not a collapse in gold but rather the removal of the fear premium that had inflated prices during the height of global uncertainty."

He emphasized that investors should never evaluate gold based solely on its all-time high.

"Buying at historical peaks is risky regardless of the asset," he said. "Missing an opportunity to make additional profits is far less damaging than suffering a real financial loss after purchasing at inflated prices."

Moneeb argued that many investors who bought gold near its record highs did so out of fear rather than rational investment analysis.

"Fear often drives emotional investment decisions," he said. "Many buyers rushed into the market believing prices would continue climbing indefinitely, only to see the market correct once geopolitical risks eased."

Regarding current market conditions, Moneeb believes today's price levels represent relatively reasonable entry points for long-term investors.

"Gold has stabilized around the $4,000-per-ounce level," he said. "The market is now moving within a relatively narrow trading range, and unless new geopolitical or economic developments emerge, prices are likely to remain broadly stable."

He added that any renewed escalation in international conflicts or a breakdown in diplomatic negotiations could quickly revive demand for safe-haven assets and trigger another rally in gold prices.

Moneeb also addressed the recurring debate over the gap between local gold prices in Egypt and international market prices, stressing that the difference should not be interpreted as an artificial pricing distortion or the existence of a so-called "gold dollar."

"The local price is not determined solely by multiplying the international gold price by the official exchange rate," he explained. "It also reflects the actual costs of bringing gold into the Egyptian market."

He said those costs include bank financing charges, import procedures, shipping, insurance, and other logistical expenses incurred whenever the domestic market requires additional supplies from abroad.

"The market operates according to supply and demand," Moneeb said. "Whenever domestic demand exceeds available supply, importers must cover these additional costs, which are naturally reflected in local prices."

He explained that the Egyptian gold market typically operates under three different scenarios.

The first occurs when domestic demand exceeds available supply. In this case, additional gold must be imported, and the associated import costs are added to the local price.

The second scenario arises when large numbers of consumers sell their gold, increasing domestic supply. Under such conditions, exporters ship excess gold abroad to generate liquidity, causing export-related costs to be deducted from local prices.

The third scenario occurs when supply and demand are broadly balanced. In that case, local prices closely track international prices without significant premiums or discounts.

"At present, Egypt is experiencing the first scenario," Moneeb said.

He explained that demand traditionally rises during the summer months as Egyptians working abroad return home and spending on jewellery increases. At the same time, many consumers who purchased gold at significantly higher prices have chosen to hold onto their holdings rather than sell at current market levels, reducing the volume of recycled gold available in the local market.

"As a result, additional imports become necessary to meet demand," he said. "That is why local prices currently include the actual cost of importing gold."

Moneeb stressed that the current premium should not be viewed as speculative pricing but rather as a reflection of genuine business costs associated with supplying the market.

Turning to consumer preferences, Moneeb said 21-karat gold remains the dominant choice in Egypt despite the growing presence of 18-karat jewellery in recent years.

"This is largely a matter of consumer culture rather than price," he said.

He noted that every country has its own preferred gold purity. In India, 22-karat jewellery dominates the market, while lower-purity gold is more common in Europe and North America. Egyptian consumers, however, continue to associate 21-karat gold with long-term savings, wealth preservation and investment.

Although 14-karat jewellery is gradually becoming more visible among younger consumers, Moneeb said it still represents only a small niche within the Egyptian market.

"The Egyptian consumer has historically viewed 21-karat gold as the traditional investment product," he said. "Changing that perception takes time because purchasing habits are shaped by generations of cultural and social preferences."

He concluded by emphasizing that gold remains a strategic store of value despite periods of volatility, urging investors to make decisions based on long-term fundamentals rather than short-term market sentiment or emotional reactions to geopolitical developments.

"Gold has not lost its shine," Moneeb said. "What has disappeared is simply the fear premium that temporarily pushed prices to unprecedented levels."