Cairo – The Egyptian government is counting on a rare decision that includes exempting gold imports from customs tax and fees, in order to reduce gold prices locally after it exceeded the global price a lot, but it raised concerns among some gold traders and manufacturers that their industry would be affected.
At the end of last week, the Egyptian Cabinet agreed to exempt gold imports, accompanied by passengers coming from outside the country, from customs tax and other fees, except for the value-added tax (on workmanship), for a period of 6 months.
Days after the government decision entered into force, gold gave up part of its gains that it had achieved over the past months, and began to retreat from its highest historical level, amid expectations of a continued decline, but in a manner equivalent to the price of the dollar in the parallel market and not the official price.
According to a newspaper Pyramids (Governmental) The gap between the local price and the global price of one gram of gold widened by more than a thousand pounds (about 32 dollars), as the price of a gram of gold locally reached about 2800 pounds, equivalent to 90.5 dollars, while the global price was around 56.5 dollars per gram. .
Throughout the past months that followed the first devaluation of the Egyptian pound in the aftermath of the Russian-Ukrainian war last year, gold prices were breaking a new record every day, and despite this, the demand for gold by citizens was unprecedented, to hedge against the pound’s fall to unprecedented historical levels. .
The depreciation of the pound 3 times since last March, the raising of interest rates by a thousand points, the rise in inflation to more than 40%, the recovery of the black market for foreign exchange, and the dollar exceeding the barrier of 40 pounds (in the parallel market); To confuse the gold market and exaggerate the workmanship of artifacts, bullion, and gold pounds.
Exemption decision
The Egyptian Cabinet’s decision set conditions and controls for exempting gold imports from customs tax for those coming from abroad, but did not specify specific quantities.
The controls included the following:
- Gold in semi-worked shapes.
- Monetary gold.
- Ornaments, jewelry and parts thereof are made of precious metals, whether or not they are broken or clad with a shell of precious metals.
According to the decision, this exemption does not include the following:
- Varieties of natural or cultured pearls.
- Precious or semi-precious stones mounted or studded on jewelry and their parts.
Those concerned welcomed the government’s decision, primarily members of the Gold and Jewelry Division of the General Federation of Chambers of Commerce, which represents a wide sector of gold traders and manufacturers. The same period last year, according to the estimates of the World Gold Council.
The head of the General Division of Gold, Hani Milad Gayed, confirmed that the availability of crude in the local markets will achieve the desired balance between local and international prices, and will also have a direct impact on the return of remittances from Egyptians abroad in the form of artifacts or gold ore.
How local gold separated from the global price?
The former head of the Chamber of Precious Metals in the Federation of Industries, Eng. Rafik Abbas, attributed the discrepancy in the price of gold locally and globally to not allowing the import of raw gold as a result of the scarcity of the dollar and the state’s desire to provide it for strategic commodities. Therefore, the gold trade circle in Egypt became closed, and with the rush for gold, prices began to rise. locally and separated from the global price.
He explained, in statements to Al-Jazeera Net, that the gold market witnessed speculation and bidding that led to a rise of more than 30% from the global market, which got out of control, and the increase in the price of a gram of gold became daily.
Abbas, who previously held the presidency of the Gold Division of the Federation of Chambers of Commerce, expected that the decision would contribute to a decline in the price of gold locally, and would encourage returning Egyptians to bring jewelry with them in unlimited quantities, thus creating a kind of balance between supply and demand.
He considered that one of the negative aspects of the government decision; Allowing the entry of gold jewelry without customs tax, which affects the goldsmiths market, buying, selling and manufacturing, and it would have been better to allow the entry of bullion only without customs duties.
The price of 21-carat gold, the most popular in Egypt, jumped from about 1,700 pounds at the beginning of 2023 to 2,800 pounds before the issuance of the latest government decision, by more than 60%, according to local press websites.
Despite this unjustified increase, the country’s demand for buying gold (gold bars and pounds) doubled to 7 tons during the first quarter of this year, according to a recent report issued by the World Gold Council.
With these quantities, the Egyptians ranked fifth in the world in terms of high demand for gold as a safe haven for their money, during the first three months of 2023, after Turkey, China, Japan and Iran.
Good and bad at the same time
Gold fell, according to the statements of one of the gold dealers, to Al-Jazeera Net, in central Cairo, to “about 2450 pounds, compared to 2800 pounds, days after the decision came into effect, and its continued decline depends on the exchange rate of the pound against the dollar.”
George Majed considered that the government decision is good and bad at the same time, on the one hand it will restore calm to the market and on the other hand it will harm the goldsmiths industry, stressing that the cause of the crisis is the presence of two prices for the dollar in the central bank and in the parallel market.
He expected that the price difference between the local market and its global counterpart would continue, but at a slower pace, because gold is not valued at the dollar exchange rate in banks, but rather in the parallel market, indicating that any decrease is in the interest of customers.
The government move to contain the crisis of igniting local gold prices and exceeding the global price comes days after the failure of the initiative of the General Division of Jewelry and Gold Artifacts of the General Federation of Chambers of Commerce “Adornment and Treasury” to reduce workmanship prices on gold artifacts for consumers, in cooperation between producing factories and gold shops.