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Silver outshines gold as inflation hits Egyptians
Silver is gaining ground in Egypt's jewellery market amid record gold prices and as surging inflation cuts the purchasing power of Egyptians
- Reuters
- Published: 00:27 May 5, 2008
Dubai: Silver is gaining ground in Egypt's jewellery market amid record gold prices and as surging inflation cuts the purchasing power of Egyptians, once leading world gold buyers.
"Silver is becoming very popular in Egypt, and the industry is developing every day," Moaz Barakat, managing director of the industry-funded World Gold Council in the Middle East, Turkey and Pakistan, said.
Egypt saw urban inflation in the year to March hit 14.4 per cent, the highest rate in three years. This has put a strain on the age-old tradition of buying gold in a country where the United Nations says about one-fifth of the population of roughly 75 million lives on less than $1 per day.
"Many Egyptians now will are limiting gold jewellery purchases to the bare minimum, because they spend almost all of their salaries on food," said Maged Saleh, a jewellery retailer in Cairo.
"So it is logical that they are shifting to silver as it is much cheaper... and many cannot differentiate between it and white gold, which is fashionable here," Saleh said.
Traditionally, Egyptians undervalue silver jewellery, while they regard gold as a financial security and a vital part of their weddings.
The country's gold demand was up 12.2 per cent at 67.3 tonnes in 2007, while fourth-quarter demand was up 8.8 per cent at 17.4 tonnes, making Egypt the best performer in the Middle East.
But with the yellow metal prices now at about $850 an ounce, traders say the newly found love for silver, traded at about $17 an ounce, is likely to cut into demand for gold. From the end of last year to March 17, silver prices surged by more than 40 per cent, while gold was up more than 20 per cent. Silver's heftier gains were built on investor flows.
"Silver is becoming a better and better buy against gold and though silver prices are volatile than the gold prices, the year over year returns are usually higher than that of gold," said Pradeep Unni assistant vice president at Vision Commodities Services.
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