Going for gold
Gold prices are skyrocketing. Sherine Nasr looks at why
Another Valentine's Day is just around the corner. Those thinking of gold as a gift, however, should reconsider. Indeed, gold prices in Egypt have witnessed unprecedented price rises off late.
Two weeks ago, one gram of 21 carat gold was on sale for LE58. It has already risen to LE64 and it is hard to know whether prices will continue to rise or stabilise.
"This [price rise] is a direct result of the political tension the world is facing today," said Hassan Elish, a gold manufacturer and trader, referring to the threat of war in Iraq.
"Investors worldwide are turning to gold as a secure investment," said Elish. He added that international demand for gold has already reached 4,000 tons per annum.
Samah Nabil, a representative of the World Gold Council (WGC), shared Elish's views. At the moment, "gold is the only safe back up for large investments," she said.
According to WGC reports, in 2002 gold prices worldwide, increased by 30 per cent, while demand decreased by 10 per cent. "These figures may be a bit misleading if taken without enough analysis," said Nabil. He explained that although there seems to be a decrease in demand for gold, what the report really indicates is that people are spending more money on gold.
Nabil indicated that gold prices began to pick up two years ago, after the signing of the "Washington Agreement", in which 15 leading gold exporters, including Germany, England and Switzerland, agreed to sell their gold according to quotas. "The US and the International Monetary Fund (IMF) later joined the agreement, giving a further boost to gold prices," Nabil said.
It is only normal that Egypt's gold market be affected by international events. "Gold prices in Egypt are determined through stock markets in London, New York and Hong Kong," said Elish. He added that an ounce (28.35 grammes) costs $370 at present, compared to $280 in 2001.
Elish claims that increases in gold prices have had neither a negative nor a positive impact on Egyptian gold traders. "Local gold traders hold their capital in gold. Therefore, any increase or decrease is not likely to affect them," said Elish. He added that, on the other hand, gold importers could be negatively affected by the progressive increase. Gold manufacturers have complained about the latest increases. "Gold scraps (fragments) are lost during the manufacturing process. We have to make up these losses through purchasing more gold," said Maher Messiha, a gold manufacturer.
For the moment, gold prices remain widely unpredictable. Indeed, those involved in the gold industry are going through a difficult phase. "It is very difficult to know where gold prices will go next. Surely, this state of uncertainty is, in a way, harmful to the gold industry," said Nabil. "Stability is the formula for a successful business, " Nabil added. Unfortunately, the market for gold is far from stable at present, she concluded.
