In more bountiful times, when we knew what economies to bet on, it was easy to pick a winning currency. However, 2011 has been fraught with several devastating surprises for the world economy. With the US facing challenges to its fiscal stability, the eurozone mired in debt turmoil and the Egyptian pound suffering from the effects of the January 25 Revolution, it isn’t easy to decide what currency to put your money in these days.
But the answer to the modern day financial crisis might lay in an age-old investment — gold. Gold prices have witnessed daily gains since the beginning of 2011, increasing 31.5% worldwide and 37% within Egypt in just three quarters, according to Ehab Wassef, member of the board of the Precious Metals Division.
Wassef, also the owner of several gold shops and factories, says the average increase in the price of gold per annum is approximately 22% — a golden opportunity for investors. And this isn’t just a figure of speech. Experts predict the price will continue to rise as uncertainty abounds, which will likely mean bottom lines for jewelry producers will take a hit, with consumers forced to pay extra for golden trinkets.
Going old school
The saying that ‘old is gold’ is proving to be true more than ever. Because the price of gold is determined by international gold exchanges — Egypt doesn’t have its own gold exchange — its value here reflects the global trend. Industry insiders say as the world’s major economies continue to falter, to put it mildly, gold prices will continue to shoot up, with consumers choosing precious metals as a safe investment that retains and grows in value.
Mohamed El Hawary, managing director of Andalusia Financial Consultancy and Investment, says there is less faith in currencies, be it the dollar, euro or yen.
“People are going back to the traditional [investment] strategy that they have always been saving their wealth in, gold,” says El Hawary.
Ayman Abo Hend, hedge fund manager at Cartel Capital adds that gold preserves buying power.
“So naturally the investors, when they see the economy isn’t right, [take] their money from the stock market and invest in gold,” says Abo Hend. “Because it is immune toward inflation and its value mostly increases over time.”
Some of the world’s emerging economies have followed suit and are purchasing gold in large quantities. Wassef says that China, India and South Korea have announced that they will buy and invest budget surpluses in gold. El Hawary adds that it isn’t just governments investing in the previous metal -- middle class investors in Russia and India are also buying gold as their buying power increases.
“There is a big demand for gold both from the stock markets and from those governments opting to invest,” says Wassef.
Egyptians are getting in on the investment action too. Given the political instability in Egypt, investors are steering away from local currencies, the stock exchange or tying up their assets in property.
“People don’t want to bind their money here,” says Abo Hend. “Now with this turmoil, people don’t want to invest in anything based here.”
This has led to an increase of the price domestically. The Egyptian pound has decreased in value compared to the US dollar, which has also contributed to a spike in domestic gold prices.
