Gold prices in Egypt had a positive week as major changes in the market were prompted by decisions made by the Central Bank of Egypt (CBE). The Gold bullion report indicates that while the market conditions have been significantly altered, there is still uncertainty surrounding the future implications of these decisions on the local markets.
The popular 21k gold started trading at EGP 3,270 per gram and saw a 10.8% increase during the week, gaining EGP 355 per gram. This rise was attributed to the CBE’s decision to raise interest rates and allow the exchange rate to be determined by market mechanisms.
The CBE’s move to increase interest rates by 600 basis points and liberalize the exchange rate led to a significant jump in the official exchange rate in banks. This decision marked the first increase in the exchange rate in over 14 months, with the pound reaching EGP 50.85 per dollar.
In addition to these changes, the National Bank of Egypt and Banque Misr introduced a new savings certificate with a decreasing interest rate over 3 years, and an agreement was signed with the International Monetary Fund to increase the value of the loan to $8bn.
The impact of these developments on local gold prices has been positive, with the increase in the exchange rate leading to a re-pricing of gold in the local market. However, the demand for gold may not experience significant changes in the short term, as its pricing is influenced by the price of the dollar in official banks and global market trends.
Looking ahead, if the CBE is successful in controlling the exchange rate and providing the necessary foreign exchange liquidity, it is expected that the exchange rate will gradually decrease in the future. This could potentially lead to a drop in gold prices as well, with supply and demand dynamics playing a more prominent role in the local market.
