Demand for gold in Egypt rose by 83 per cent in 2022 as the Egyptian pound hit record lows against the dollar and inflation rose sharply, a World Gold Council report said.
Egyptians resorted to gold to avoid uncertainty over the local currency, with gold bars and coins accounting for the bulk of purchases, the report said.
While buyers of bars and coins turned to gold to hedge against record high inflation, investors dealing in exchange-traded gold reduced their holdings following repeated interest-rate hikes by the US Federal Reserve, the council said.
Demand for gold is inversely proportional to US federal interest rates.
In Egypt, the demand for gold peaked in the fourth quarter of 2022, the report said. It explained that this was sparked by panic following the central bank's second devaluation of the Egyptian pound in October.
The pound has lost over half of its value since the first devaluation in March, while annual urban consumer inflation rose to 21.3 per cent in December.
The devaluations were part of an economic reform package adopted by the government to make the country eligible for a $3bn loan from the IMF which was approved in December.
Mohamed Maher, a jeweller in Islamic Cairo’s jewellers’ district, told The National that he noticed a sharp spike in customer purchases in November and December.
“People came in asking mostly for used jewellery because they don’t have to pay the fixed tax the government levies on sales of new gold. They also don't have to pay any labour costs on it. My wares of used items were seriously depleted during the two months,” Mr Maher said.
There was also a marked increase in demand for gold bars, he said, explaining that during more economically stable times, customers tended to buy wearable gold for ornamental purposes.
“When times get rough, people will ask for gold bars or used jewellery because investment becomes their primary focus and they forget about more frivolous ideas,” he said.
Overall year-on-year gold investment in the Middle East rose by 42 per cent, which, according to the report, was due in large part to double-digit gains in the fourth quarter of 2022 by Egypt and Iran.
Turkey’s investment in gold also rose by 35 per cent.
However, the largest increase in gold investment was witnessed in US and European markets where combined purchases of gold bars and coins hit a record high of 427 tonnes in 2022, according to the report.
The previous record was 416 tonnes in 2011.