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What’s Driving Egypt’s Gold Market?

An employee at a gold shop in Khan El Khalili, Cairo (Reuters)
An employee at a gold shop in Khan El Khalili, Cairo (Reuters)
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What’s Driving Egypt’s Gold Market?

An employee at a gold shop in Khan El Khalili, Cairo (Reuters)
An employee at a gold shop in Khan El Khalili, Cairo (Reuters)

Gold prices in Egypt have risen more sharply than global prices recently, which could affect buying and selling in a country where many use gold as a safeguard against economic instability.

Egyptian traders are worried that these recent price hikes, deemed “irrational” by some, might reduce sales. This follows a decline in the gold market during the second quarter of this year, though there has been a recent surge in purchases.

As a result, there’s renewed discussion about reinstating the customs exemption for gold brought in by Egyptians returning from abroad.

The head of the General Gold Division for Gold and Jewelry at the General Federation of Chambers of Commerce Hani Milad told Asharq Al-Awsat that the current market conditions resemble those from a year ago, prompting an urgent meeting on Friday.

They decided to propose to the government, starting Sunday, the reinstatement of the customs exemption.

Milad said this move would help balance supply and demand given the recent surge in gold demand and record high global prices.

“When we proposed the customs exemption in May 2023, the market conditions were similar to now. Reactivating this initiative seems to be the best solution,” said Milad.

“We will present it to the government on Sunday and wait for their response," he added, describing the current price spikes as “irrational.”

Moreover, Milad noted strong buying activity in the past two weeks driving up prices, leading to the proposal for reinstating the exemption. He expressed uncertainty about whether the government will approve or reject it.

Gold performed well in July, rising by 4% to $2,426 per ounce after a slight dip in June.

The increase was driven by lower US 10-year Treasury yields, making gold more attractive, and a weaker dollar, making gold cheaper for foreign buyers. Additionally, interest rates on gold futures increased more than long positions.

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China’s Inflation Rose More than Expected Due to Extreme Weather

A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES
A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES
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China’s Inflation Rose More than Expected Due to Extreme Weather

A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES
A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES

China’s consumer prices rose more than expected in July, largely due to seasonal factors like weather, leaving intact concern over sluggish domestic demand and boosting the case for more policy support.
The consumer price index climbed 0.5% from a year earlier, exceeding the 0.3% estimate in a Bloomberg survey, data from the National Bureau of Statistics on Friday show.
Excluding volatile food and energy costs, core CPI rose 0.4%, the least since January, indicating lingering weakness in overall demand, according to Bloomberg.
“Unfavorable weather conditions and the low base for pork prices from last year, instead of rising domestic demand, were the major drivers,” said Serena Zhou, senior China economist at Mizuho Securities Asia Ltd. “We anticipate coordinated fiscal and monetary support in the second half of 2024.”
Lynn Song, chief economist for greater China at ING Groep NV, told Reuters, “Conditions are in place to see inflation trend a little higher in the coming months but it should not impede further monetary easing.”
“With low inflation and weak credit activity, domestic factors continue to favor further monetary policy easing,” she said. “We continue to look for at least one more rate cut this year with the potential for more if global rate cuts accelerate.”
For her part, Dong Lijuan, chief statistician at the NBS, attributed the rise in the headline CPI figure to “a continued recovery in consumption demand.” Yet she told Bloomberg that high temperatures and rain in some regions had an impact on prices.
Adverse weather pushed up vegetable and egg prices in July, reversing losses the previous month. That helped food prices snap a year-long run of contraction, which has been a major drag on consumer inflation. The fastest surge in pork prices since 2022, thanks to a low base from last year, also contributed to the increase.
Meanwhile, the Chinese government said that extreme rainfall and severe flooding in China led to a near doubling in economic losses from natural disasters in July from a year earlier.
China suffered 76.9 billion yuan ($10.1 billion) in economic losses from natural disasters last month, with 88% of those losses caused by heavy rains, floods or their effects, according to the Ministry of Emergency Management.
It was the biggest amount of losses for the month of July since 2021, ministry data showed.
Natural disasters during the month affected almost 26.4 million people across China, with 328 either dead or missing, the ministry said.
During the month, 1.1 million people were relocated, 12,000 houses collapsed and 157,000 more were damaged. Some 2.42 million hectares of crop area were also affected.
In the markets, Chinese shares closed moderately lower on Friday even after China's consumer price index rose at a faster-than-expected rate, with analysts stressing that demand is still sluggish.
Asian shares were trying to end a difficult week on an intense note after Wall Street bounced and data revealed China taking an action away from deflation, while Japanese stocks battled to sustain an early rally.
The Shanghai Composite closed down 0.27% at 2,862 points, while the Shenzhen CSI 300 fell 0.34% to 3,331 points.
The blue-chip CSI300 index was down 0.34%, with its financial sector sub-index higher by 0.07%, the consumer staples sector down 0.23%, the real estate index up 1.67% and the healthcare sub-index down 1.63%.
At the close of trade, the Hang Seng index was up 198.40 points or 1.17% at 17,090.23. The Hang Seng China Enterprises index rose 1.29% to 6,017.85. The smaller Shenzhen index ended down 0.66% and the start-up board ChiNext Composite index was weaker by 0.985%.