3 minutes read | 19/03/23 - 26/03/23
19/3-26/3: Weekly precious metals prices & returns update – international and local gold prices down – Fed increases rates – Will the CBE raise rates this week? and more.
Market Watch
Weekly Change of Local & International Gold Prices
| Close | Close | Weekly Change | |
|---|---|---|---|
| International Gold (LBMA) ($/Oz) | 1,811.1 | 1,977.8 | ↓ -0.57% |
| International Gold (LMBA) ($/g) | 63.9 | 63.6 | ↓ -0.57% |
| International Gold ($/g) quoted in EGP | 1,979.1 | 1,967.9 | ↓ -0.57% |
| Local Gold (LE/g) (24k) | 2,359.8 | 2,296.9 | ↓ -2.66% |
| Premium/Discount* | 16.1% | 14.3% |
*Difference between the local and international traded price of gold
Weekly Change of Other Key Precious Metals Prices
| ($/Oz) | Close | Close | Weekly Change |
|---|---|---|---|
| Silver | 22.6 | 23.2 | ↑ 2.8% |
| Platinum | 979.2 | 984.4 | ↑ 0.5% |
| Palladium | 1,429.5 | 1,422.0 | ↓ -0.5% |
Weekly Returns of Local Gold Compared to Alternative Asset Classes
| Close | Close | Weekly Change | |
|---|---|---|---|
| Local Gold (LE/g) (24k) | 2,359.8 | 2,296.9 | ↓ -2.66% |
| EGX 30 | 14,704 | 15,625 | ↑ 6.3% |
| 1 Year EGP T-Bill** (Yield) | 22.58 | 22.59 | ↑ -0.88% |
| Official Exchange Rate | 30.95 | 30.95 | 0% |
** When the yield on T-Bills increases the price of the security decreases, therefore the return is negative, and the opposite is true.
Global Update
The international gold price sustained a hit last Wednesday prompted by the Fed’s decision to raise rates.
The international gold price closed last week at $/Oz 1, 977 down from a close of $/Oz 1,989 during the previous week, constituting a weekly growth of -0.6 percent. Due to the Fed’s decision last Wednesday to raise rates, the gold price sustained an almost $50 drop in one day. Gold then gained back some of its losses by the end of last week on the back of a weakened dollar.
Both the U.S. Fed and the Bank of England raise rates by 25 basis points in response to the persistent inflation and the banking crisis.
Last week the U.S. Fed increased interest rates by 25 basis points to now reach 5%, and the BoE also hiked rates by the same amount, to now reach 4.25%. Both institutions point to the banking crisis concern and persistent inflation as the main drivers of the decisions to raise rates.
UK February inflation increased back to 10.4%.
Inflation in the UK has now passed the 10% mark, mainly driven by high food and fuel prices, and remains high as February data shows a significant increase in food prices. As mentioned, such acceleration in inflation has promoted the BoE to raise rates now for the 10th time in less than a year.
Local Update
The local gold price has been on a steady rise throughout March, due to the expectation of an upcoming devaluation.
As we mentioned last week the expectation is that gold will rise in anticipation of more interest rate hikes and an upcoming devaluation. Egyptians’ demand for gold is increasing as the prevalent expectations are that prices may increase, following another EGP devaluation. However last week, the local gold price dropped 2.6 percent on the back of the dip in international prices, following the Fed’s decision to raise rates.
World bank to lend Egypt $ 7 billion over the course of 5 years.
The Country Partnership Agreement between Egypt and the WB aims to generate more private sector jobs, improve healthcare and education services, and promote macro stabilization.
What to look Out for This Week
Keep an eye out for CBE’s MPC meeting this Thursday, where expectations point to a substantial rise in interest rates.
Keep an eye out on gold prices and EGP/$ rates as expectations point to an upcoming devaluation and therefore increase in gold prices.