A recent report issued by Gold Bullion has revealed the reasons for the decrease in Egypt’s exports of jewelry and precious stones during the first five months of 2023 by 45%, to record $425m, compared to $766m during the same period of 2022. The main reason behind this decline is due to weak global demand for gold during the first half of the year due to depreciation of gold prices and investors directed to government bond markets, which were characterised during the last period by high returns on them.

The Gold Bullion report stated that Egyptian exports of jewelry and precious stones are still focused on some traditional markets without opening new markets for exports, as Canada ranks first with about $309m, compared to about $320m during the same period of 2022. The UAE market comes in second with approximately $110m, compared to $442m in the same period last year, accordingly, the significant impact on total exports is due to the decrease in demand in the UAE market.

The report indicated that one of the reasons for the decline in Egypt’s gold exports is the resort of central banks around the world to raise interest rates to counter the wave of global inflation, and this has caused an increase in demand for government bonds in general, which negatively affects the attractiveness of gold for investment due to the high cost of gold. The alternative opportunity, as gold is an asset that does not provide a return to its holders, compared to government bonds that provide a return that increases with the increase in interest rates.

As for the local side in Egypt, the first half (1H) of this year witnessed a great demand for bullion and gold pounds with 90% increase in demand due to high inflation in Egypt to historical levels as a result of the Egyptian pound depreciation against dollar.

The report highlighted that high demand for bullion and gold pounds at this record level caused decline in domestic supply of gold due to the strength of demand, and therefore gold companies worked to fulfill domestic purchase orders instead of paying attention to export, which at the same time suffered from weak external demand.

Egyptian exports of jewellery and precious stones will increase again during the H2 of the year for a number of reasons, including the end of cycle of raising interest rates by global central banks, and thus the demand for gold will increase significantly. In addition, the continuation of global central banks in buying gold and increasing its reserves of the gold, which in turn will increase global demand for gold and thus will cause an increase in its prices and an increase in demand for it, and then an increase in exports.

Among the reasons for the return of Egypt’s gold and jewelry exports to increase again, is the stability of domestic demand in Egypt for gold and the occurrence of a balance between supply and demand after allowing gold imports without customs or fees, which prompts companies to return to export in a large way, according to the report.

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