Egypt ranked fifth in the Arab world and 31st globally among gold-possessing countries after its gold reserves rose by 24 percent to reach 125.8 tons until the end of the first half of 2023, economist Ashraf Ghorab announced.
He explained that this comes as the Central Bank of Egypt seeks to enhance the balance of its international reserves by diversifying it to support the local currency.
Gold is an important means of hedging against currency fluctuations, Ghorab added, especially in light of geopolitical developments and global crises after the Russian-Ukrainian war.
The world has seen numerous economic crises in the past few years, he explained, including coronavirus pandemic closures, climate change ramifications and the Russian-Ukrainian war, which has resulted in geopolitical and economic instability and increased fears of a global economic recession.
He explained that these fears have prompted central banks globally since 2022 to enhance its gold reserves, in order to hedge against the risks of global inflation.
Egypt ranked third among the most developed countries in increasing gold reserves during 2022 according to the statistics of the World Gold Council.
The value of gold registered as foreign exchange reserves amounted to about US$7.773 billion at the end of January, according to the Central Bank of Egypt’s statistics.
Ghorab pointed out that Egypt’s move to increase gold reserves aims primarily to support the local currency against the current global economic and geopolitical fluctuations.
Statistics indicate that the central bank seeks to increase the strategic reserves of gold to break the barrier of 200 tons to provide alternatives other than the US dollar, as means of hedging against the fluctuating exchange rate of the dollar which will contribute to supporting the national currency, Ghorab explained.
Foreign central banks have also increased its reserves of gold, reaching 25 percent of the total reserves in China, India and Russia and rising from 55 percent to 75 percent in US and European countries, according to the statistics of the World Gold Council.
The reliability of Gold
Gold is a safe haven to be hedged with in times of crisis and market fluctuations and the decline of major currencies.
It is also a tool to hedge against the impact of inflation, he said, explaining that some countries resort to diversifying its reserves of gold to reduce the influence of the dollar in order to provide a cover for its national currency away from the dollar.
He noted that during the wars in Iraq and Afghanistan and in the financial crisis of 2008, the Federal Reserve itself increased its gold reserves due to the increased instability.
According to Ghorab, Egypt possesses many gold mines and is seeking to increase its domestic production of gold.
The most prominent of these mines is the Sukari Gold Mine, which contains about 12 million ounces of gold, and the Iqat Gold Mine, which contains one million ounces.
Egypt’s gold production is estimated at about 15.8 tons of gold annually, according to official statistics.
Ghorab said that the World Gold Council statistics showed that Egyptian purchases of gold jumped during the first half of 2023 to 33.5 tons, compared to 22.9 tons in the same period in 2022.
