The current Egyptian unrest proved the stability of Egypt to be an influential in the world economy. In turn, the world economy affects how gold price moves.
First, the geographical location of Egypt made it a major center in the trade routes between Europe and Asia, plus Europe and Africa. Egypt is located in the North-East of Africa, with part of it in Asia, adjacent to Israel. It is the gate of naval route between Europe, through the Mediterranean, and Asia, to the Indian Ocean, the Middle East, East and South Africa. It might not be the center of gold trading routes, but a considerable portion of the world trade passes through the Egyptian Suez canal.
It is one of the most populace countries in the region, the third after Nigeria and Ethiopia in Africa, the largest in the Middle East, even larger than Iran. In terms of GDP, it is also the third in Africa, after South Africa and Nigeria respectively. Egypt’s trading partners are mainly the U.S., China, Saudi Arabia and Turkey. Any setback in the Egyptian economy effect, indirectly, the economies of U.S. and its allies such as the European Union and the Middle East.
Egyptians, like other Middle-Easters and Indians, still see gold as money. Dowries for weddings are mainly gold, beside a considerable amount of cash and gifts. The Egyptian grooms are the ones who pay dowries to the bride herself. It’s much like the pride’s price, but it belongs to the bride herself, not her family. In rural areas, they might turn a blind eye to the cash and gifts, but gold is un-negotiable.
Egypt is one of the most stable countries in the region. However, since 25 January 2011, the stability of the country hanged on the balance. After a year of the Presidential election, the general populace saw a complete failure in administrating the country’s affair under the Muslim Brotherhood (MB). People took it to the streets in millions, literary, in almost every major city to call for the president and his government resignation. In times of unrest like these, we should see safe-haven demand on gold, especially in a country much like India in gold demand trends, No? Actually, gold demand didn’t soured as much as expected, as more than 50% of the Egyptians didn’t have a job or the money to buy some! Unemployment soured despite the official sayings, and prices of basic commodities skyrockets.
The current unrest had its effect on gold price, but not as expected. Fears of anarchy and chaos were in the hearts of those protesters. Gold jewelry industry in Egypt and gold mining are falling behind. Unless the government heeds for the peoples call for stepping down, and stop threatening the general populace with extremists, the future of gold industry and gold trades in Egypt will remain obscure, much like the Egyptian future itself.