3 minutes read | 23/4-30/4
23/4-30/4: Weekly precious metals prices & returns update – international gold steadies – U.S and E.U record marginal GDP growth- local gold significantly rises- and more.
Market Watch
Weekly Change of Local & International Gold Prices
| International Gold (LBMA) ($/Oz) | 1,983.2 | 1,990.2 | 0.36% |
| International Gold (LMBA) ($/g) | 63.8 | 64.0 | 0.36% |
| International Gold ($/g) quoted in EGP | 1,973.2 | 1,980.2 | 0.36% |
| Local Gold (LE/g) (24k) | 2,760 | 2,999.0 | 8.66% |
| Premium/Discount* | 28.5% | 34.0% |
* Difference between the local and international traded price of gold
Weekly Change of Other Key Precious Metals Prices
| ($/Oz) | |||
| Silver | 25.1 | 25.1 | 0% |
| Platinum | 1,127.7 | 1,076.0 | -4.6% |
| Palladium | 1,602.1 | 1,502.6 | -6.2% |
Weekly Returns of Local Gold Compared to Alternative Asset Classes
| Local Gold (LE/g) (24k) | 2,760 | 2,999.0 | 8.66% |
| EGX 30 | 17,516 | 17,796 | 1.6% |
| 1 Year EGP T-Bill** (Yield) | 23.48 | 23.52 | 0.2%*** |
| Official Exchange Rate | 30.95 | 30.95 | 0% |
** Weighted average accepted bids of weekly one-year T-Bill
*** When the yield on T-Bills increases the price of the security decreases, therefore the weekly change is negative, and the opposite is true.
Global Update
International Gold price steadies throughout April, hovering between $/Oz 1, 970 to $/Oz 2,000, due to global economic uncertainties and banking sector turmoil.
International gold closed last week at $/Oz 1,990.2, up by a mere 0.36% compared to the close of the previous week. In the first week of April gold exceeded the $/Oz 2,000 mark, recording a 1-year high of around $/Oz 2,021. Again, gold has solidified its “safe haven” status over the past months as pressures on the dollar, high global inflation and the banking crisis continue to linger.
Q1 2023, Euro-zone GDP growth data shows a marginal 0.1% growth over the same period of the previous year. The almost negative growth comes on the back of continued pressures from the Russia/Ukraine conflict and high energy prices.
Growth varied between EU countries with German economy contracting by 0.5%, while Italy and Spain recorded growth of 0.5%. However, expectations for a healthy GDP growth re-bound are unlikely, as ECB continues to signal future interest rate increases to combat high inflation. High interest rates during the second quarter of 2023 may very well dip EU GDP growth into negative territory.
U.S GDP growth data for Q1 2023 indicates a sizable slowdown in the U.S economy, recording a 1.1% increase over the same period of the previous year. Slower than expected growth is a result of the U.S high inflation/interest rate environment.
Local Update
April 2023 has seen a significant surge in local gold prices, with the 24k gold price exceeding the LE/g 3,000 mark during the last four days of the month. High gold prices in Egypt have been primarily driven by higher demand, especially during and after the holiday season, and more structurally due to increased expectations of future EGP devaluation.
The 24k local gold recorded a massive 8.6% weekly increase to close last week at LE/g 2,999. As our price table above indicates, Egyptian gold is now trading at around 30% higher than international gold. This price variation between local and international prices, clearly indicates as we have mentioned before, that demand for gold in Egypt is not price sensitive, rather, demand is naturally driven by people’s affinity for gold and by the recent economic pressure, underpinned by high inflation and devaluation.
Egypt may allow expats to import duty-free gold. Minister of Supply and Internal trade explained that “this aims to contain the increased prices of gold in Egypt.”
Last week the leading rating agency S&P downgraded Egypt’s’ debt outlook to negative status, and maintains Egypt’s credit rating at B.
According to the agency, key reasons behind the downgrade are the slow pace of economic reforms and prospects of Egypt inability to meets its foreign debt obligations. It is noteworthy to mention that the yield on Egypt’s outstanding dollar denominated bills has been increasing, which in turns lowers the price of the bill. This is due to the inverse price/yield relationship of bills and bonds. An increasing yield on T-bills are problematic for the issuing country, as it will have to pay back higher interest payments to the investors.
What to look Out for This Week
Keep an eye out for Egypt’s April Inflation data, and updates about local gold prices.