Bankers are monitoring indicators of growth in Egypt’s gold reserves
Banking experts have revealed that the growth of gold reserves of countries is a global indicator, especially after the inflationary crisis that the world has been witnessing lately.
And they added, in exclusive statements to Al-Mal, that the Central Bank of Egypt aims to increase gold reserves to support the strength of the pound, and also represents a move by the Central Bank to add a component to foreign reserves to hedge against the fluctuation of its components.
They pointed out that the trend towards gold as a reserve is considered a storage of value and avoidance of currency value changes, and strengthens the position of countries in relation to foreign exchange reserves.
A report by the World Gold Council revealed that the central bank’s gold reserves rose to 125.3 tonnes by the end of the third quarter of this year.
The report stated that gold represents 21.63% of the total foreign exchange reserves of the Central Bank of Egypt, amounting to $31.136 billion.
Hani Aboul Fotouh, a banking expert, said the gold reserves, estimated at 125.3 tons, were purchased late last year and disclosed by the World Gold Council last February.
He added to “Al-Mal” that he does not expect an increase in Egypt’s gold reserves at this time, to allow the Central Bank to convert some of the cash in foreign currencies into gold.
He explained that the purchase of gold reserves is a step by the central bank to add a component to foreign exchange reserves, in order to protect against the fluctuation of its components and add value to them.
He pointed out that the cash reserve faces a big challenge in being quickly used to meet the urgent obligations required by the Egyptian government, whether it covers the import of goods or other obligations such as loan installments and others.
The Act on the Central Bank and the Banking System published by Act no. 194 from 2020 stipulates that among the prohibitions for banks under the Central Bank Act, 6 of them are prohibited, that banks are prohibited from trading in movables or real estate by purchase, sale or exchange, except for real estate intended for the bank’s operations or for social services. Or the health of the workers, or movable or immovable property transferred to the bank in satisfaction of a debt to others, provided that the bank disposes thereof within one year from the date of transfer for movable property and five years for immovable property, and the Board of Directors has the right to extend the period if circumstances require it, and some banks have an exception to this prohibition according to the nature of their activity.
Banking expert, Mohamed Badra, commented on the increase in gold reserves in Egypt, as it is an indicator of the strength of the Egyptian pound, indicating that the policy of buying gold is wise.
The central bank announced an increase in the value of gold in foreign reserves to $7.078 billion at the end of November 2022, compared to $6.612 billion at the end of last October.
Badra added for “Al-Mal” that all countries have gold reserves, and the central bank’s policy is to diversify reserves, some of which are gold and others are bonds.
The volume of gold demand rose during the third quarter of this year, by 28% year-on-year, to 1,181 tons, the report said.
Since the beginning of 2022, gold has managed to increase by 18% overall in terms of demand volume compared to 2021, only to recover again and return to pre-Covid-19 levels in 2020.
Amr El Alfy, head of research at Prime Securities Brokerage Company, said that the increase in Egypt’s gold reserves is not only due to foreign purchases, and that we own the Sukari mine, which we benefit from in order to obtain quantities of gold.
It was a review of the Sukari mine – Egypt’s only mine producing gold commercially – which showed the biggest increase in reserves in 10 years, and Australia’s Centamin Mining, which operates the mine, revealed that the more than one million ounce increase in reserves at Sukari supported its plans to produce 500 thousand ounces of gold per year in the coming years of the next ten.
Egypt’s Sukari gold mine’s reserves rose by 1.3 million ounces to 11.11 million ounces, and reserves rose for the second year in a row as they rose 13% from 2021 figures, the mine’s latest indicators showed. .
Alfy added to Al-Mal that the rise in gold reserves is a global indicator, after the currency devaluation crisis around the world, to a large extent, which indicates that currencies – especially the dollar – are based on the confidence of dealers and the ability of the US government and its dominance in the global trade and its great size and military strength, emphasizing that after the reduction in interest rates, the trend of gold as a store of value.
The World Gold Council report tracks the high volume of demand for gold by central banks, as data shows that the value of purchases has reached around 400 tonnes, quarterly.
Al-Alfy explained that countries such as Russia and China are working to increase their holdings of gold, and are buying it on a large scale, indicating that gold stocks strengthen the position of countries, in terms of foreign exchange reserves, so that it is not only limited to holding foreign currency, because it quickly loses value, unlike gold and its cohesion.
It is significant that Egypt was the largest buyer of gold at the level of central banks, during the first quarter of 2022.
Amr Al-Alfi: Creating stocks strengthens the state’s position
Badra: The policy of the central bank is to diversify between the yellow metal and bonds