In the wake of the recent unfolding of troubling economic events, Egyptians are pondering what the future holds for the economy and how their everyday lives may be affected if the current economic challenges persist. Unfortunately, the short answer is, “we are not entirely sure.” Multiple promising and discouraging factors are at play here, making it challenging to provide clear-cut answers. However, one thing has become apparent throughout recent history; in times of economic uncertainty, people all over the world turn to gold to preserve and protect their wealth.
Gold has been utilized for thousands of years as a medium of exchange and as a valuable commodity, withstanding the test of time and maintaining its value through the ages as a means of preserving wealth. Since the turn of the century, and only during the past 22 years the gold price has increased five folds, from around $400/Oz to recently breaking the $2,000/Oz mark. For us Egyptians, the Egyptian Pound witnessed an almost eight folds depreciation during the same period. This means the 1 gram of gold you bought in the year 2000 is now much more valuable compared to the EGP you chose to deposit in the bank. Globally, other paper currencies have also been diminishing in value due to high levels of inflation and global debt, while equity markets witnessed alarming volatility on the back of the 2007/2008 financial crisis and the more recent Covid-19 pandemic.
Gold is considered one of the most secure and highly liquid investment options available, as the chances of gold losing its entire worth is almost non-existent. Yes, gold prices may fluctuate but will certainly not collapse entirely. For this very reason, investors resort to the yellow metal at times of uncertainty or economic crises, more so than equity and debt market instruments, which are susceptible to several economic and geopolitical shocks.
Currently, in the case of Egypt, we have all witnessed the severe devaluation of the Egyptian Pound and the soaring inflation. The expectations are that in the short-term, we may see more depreciation, coupled with rising inflation and the weakening of purchasing power. That’s why now is the right time for Egyptians to start investing in gold to safeguard their wealth.