Egypt is experiencing a gold buying frenzy as the national currency loses value

Many people want to protect their savings by hoarding gold, but this has resulted in an exponential rise in the metal’s price, making it unavailable to other consumers.

Egyptians are stockpiling gold to protect their savings as their national currency continues to lose value against foreign currencies.

The stampede for gold has driven up its price in the local market significantly, prompting experts to warn of the possibility of a gold price bubble.

According to independent economist Mamdouh al-Wali, gold is now priced in relation to the parallel, rather than the official, market exchange rate of the US dollar. “Speculation is very high, raising concerns about the future price of this metal and other commodities,” he said.

In the parallel market, a US dollar sells for more than 28 pounds, while banks set the price of one dollar at 24.50 pounds.

Since the start of the Ukrainian conflict in February, the Egyptian pound has lost value against foreign currencies, particularly the US dollar.

The pressures exerted on the Egyptian national currency by the consequences of the war in a country heavily dependent on food imports, particularly from the two countries involved in the war, are primarily driving the decline in its value.

The rise in international grain, cereal, and legume prices caused by the war increased demand for US dollars in Egypt, which now has to pay more for its food imports.

The demand for foreign currency to cover rising import costs has exacerbated the flight of billions of dollars in foreign assets from Egypt, particularly in light of interest rate hikes in other countries, particularly the United States.

Egypt, which follows a managed exchange rate regime, had to devalue its national currency twice this year, once in March and again in October, to deal with these developments.

The IMF supports currency depreciation, expecting it to reduce external imbalances, boost Egypt’s competitiveness, and attract foreign direct investment.

However, the same move has caused the pound to lose nearly half of its value against all foreign currencies, particularly the US dollar, the primary import and export currency.

Purchasing gold to protect savings

Egyptians with money, including those with meagre savings, continue to watch as the Egyptian pound is dwarfed in value by foreign currencies.

This decline in the local currency translates into higher prices for everything from basic necessities like food and medicine to most luxury items like automobiles and gold jewellery.

The forecast for the Egyptian pound’s exchange rate against foreign currencies is bleak, with expectations that the CBE will devalue the pound further in the coming weeks.

This is also causing concern among Egyptians with small and large deposits about the loss of their savings.

The same Egyptians are rushing to convert the banknotes in their hands, at home, and in their bank accounts into safer assets like real estate, automobiles, and gold.

Mohamed Fouad, a computer engineer, used to have around 120,000 Egyptian pounds (approximately $4,897) in his bank account. He took the money out a few weeks ago and spent it on gold jewellery instead.