Egyptians go for gold as pound drops

Egypt\'s gold demand surged during the fourth quarter of last year as fears mounted over the depreciation of the Egyptian pound. Demand for the yellow metal - overwhelmingly jewellery - leapt 54 per cent to 14.4 tonnes during the quarter, according to data released yesterday by the World Gold Council. The demand for gold reflected Egyptians\' fears of a weakening currency and a flight to safe havens, said Raza Agha, the chief economist for the Middle East and Africa at VTB Capital. \"When confidence in the local currency goes down and is falling, concurrently people start buying a lot more precious metals to preserve the value of their savings,\" he said. \"I\'d expect demand to increase even more in the first quarter of this year because the central bank started weakening the currency at the end of December.\" The Egyptian central bank began a managed depreciation of the pound towards the end of December to maintain the country\'s foreign reserves, as political turmoil gripped the country and investors headed for the exit. The Egyptian pound depreciated 4 per cent against the US dollar during the fourth quarter of last year, and has fallen a further 6.1 per cent so far this year as central bank auctions began. \"Egypt proved to be a highlight within the Middle East, diverging sharply from the other markets in the region with a rise of 35 per cent [during 2012],\" the World Gold Council said. Outside of the Middle East, China\'s hunger for gold returned during the past year as the country\'s economy regained strength, but India remained the biggest importer of the precious metal despite a dip in demand. Central bank buyers also helped to sustain demand for gold, though tonnage fell by 4 per cent, according to the World Gold Council. Gold demand leapt in China with a 24 per cent boost in investment demand during the final quarter of last year, while purchases of jewellery remained steady, said Marcus Grubb, the managing director for investment at the World Gold Council. \"China and India remain the world\'s gold powerhouses, and by some distance, despite challenging domestic economic conditions,\" he said. \"In India, consumer sentiment towards gold remained strong despite measures aimed at curbing demand, reaffirming gold\'s role in Indian society. In an underdeveloped financial system in India, gold has an important role to play.\" Central bank buying rose last year, with net purchases increasing 17 per cent compared with a year earlier, totalling 534.6 tonnes. The figure was the highest level since 1964, when the United States Treasury department began to ease criminal penalties on American citizens privately owning the precious metal during the era of the gold standard. \"Central banks\' move from net sellers of gold to net buyers that we have seen in recent years has continued apace,\" Mr Grubb said. \"The official sector purchases across the world are now at their highest level for almost half a century.\" Indian gold demand declined 12 per cent to 261.9 tonnes during the fourth quarter of last year, while China\'s gold purchases were flat at 202.5 tonnes. Worldwide, the value of gold sales last year reached an all-time high of $236.4bn, the data showed. However, the yellow metal has had a less than shining performance on world markets this year, falling 1.3 per cent to $1,642.15 per troy ounce.