In the wake of the Central Bank of Egypt’s decision to reduce interest rates, attention is once again turning to the gold market, amid questions about whether the yellow metal will be the first beneficiary of the decline in returns on bank certificates and deposits.
Hani Milad, head of the Gold Division at the General Federation of Chambers of Commerce, believes that the impact of the decision on gold prices in the local market will remain limited, indicating that the decisive factor is not the decision itself, but rather the behavior of savers during the coming period, and the extent to which they tend to withdraw their savings from banks and invest them in gold.
Thoughtful moves, not sudden jumps
He explained that lowering interest rates might encourage a segment of citizens to search for alternative tools to preserve value, most notably gold, but that does not mean sharp price jumps. The market – according to his estimates – may witness an increase in prices not exceeding about 5% if the scope of investment demand expands, a percentage that remains within the framework of natural movements.
He pointed out that interest decisions alone do not create major waves of rise in the gold market, as several factors interfere in determining the general direction of prices, whether at the local or global level.
Lightweights are in the lead
Regarding consumer behavior, he pointed out that the demand for light weights has been continuing for some time, as they are the preferred option for medium and long-term savings, stressing that this trend is not directly related to the decision to reduce interest rates, but rather reflects a stable pattern in the market in recent years.
The price equation…multiple factors
He stressed that the movement of gold in Egypt is linked to three main determinants:
The price of an ounce globally
The exchange rate of the dollar against the pound
Inflation rates and market liquidity.
These factors together make it difficult to accurately predict price trends, especially in light of accelerating global fluctuations.
Keep an eye on the markets
The head of the Gold Division concluded by stressing that the market is experiencing a state of anticipation during the next stage, waiting for the trends of investors and savers to become clear after the recent monetary decision, and the extent to which gold will strengthen its position as a safe haven in light of the current economic and geopolitical changes in the region.
