Inside the wood-paneled shop in Cairo’s famed Khan el-Khalili market, the price of gold was plummeting and Rania Hussein could feel the future slipping through her fingers.
She and her mother watched the gold dealer weigh the necklace and three bracelets they had brought — jewelry that Mrs. Hussain had bought for her mother as a gift five years ago, but which they now had to sell. Her brother was getting married, an expensive undertaking even in normal times, but the economic crisis and skyrocketing inflation that had gripped Egypt for more than two years left the family with no other choice.
Years of reckless spending and financial mismanagement had culminated in 2022, when Russia’s invasion of Ukraine helped plunge Egypt into financial crisis. The war in Gaza has only deepened the pain.
The crisis has driven up the price of eggs at the grocery store as well as new furniture that her brother is traditionally expected to buy for the marital home, Ms. Hussain said. She also closed her clothing design business and wiped out three-quarters of the value of her brother’s salary as an accountant.
And, in a curious side effect, it disturbed Khan el-Khalili’s usually calm gold jewelry and goldsmith shops, with old-fashioned signage in curly letters and recitations of the Koran blaring incessantly from dusty speakers. Over the past two years, speculators who bought gold descended on the market as Egypt’s collapsing currency boosted demand for gold as a safe haven from turmoil.
While the metal’s price has generally risen despite the occasional reversal, its value has ebbed and flowed with demand, depending on the vagaries of daily economic news, a volatility that has confused consumers and traders alike.
On the day Ms Hussein visited the market, the price of gold was falling rapidly, following news that Egypt may have found a lifeline to save it from what until then looked like looming economic disaster. The country late last month sealed a $35 billion deal for the United Arab Emirates to develop a new city and tourist destination on Egypt’s Mediterranean coast.
Within hours of the deal being announced, the Egyptian pound strengthened, the black market value of the dollar fell and gold prices fell with it.
If the Emirati funds materialize as promised, analysts say, the cash, along with a new bailout deal with the International Monetary Fund expected within weeks, will help Egypt stabilize its economy. It will help the country avoid a debt default, pay for a backlog of needed imports and curb the black market in dollars created by the foreign currency shortage.
But for the Egyptians, the damage is done.
As they watched the value of their wages and savings evaporate over the past two years, the poor skimped on food, the middle class pulled their children out of good schools for cheaper or free ones, and even the most affluent went without breaks and meals outside. Millions of people fell into poverty.
“It’s not guaranteed to go up and I’m afraid it will go down again,” Ms Hussain said of the drop in gold prices as she sat in the market shop, explaining why she decided to sell. “And the price of furniture should come down, but we haven’t seen that yet.”
He sighed, adding, “It’s all a joke.”
The turmoil has turned many people into reluctant speculators, their lives dominated by uncertainty and rumours. Checking the price of the dollar on the black market has become as common as checking the weather forecast.
On paper, Ms Hussain would collect more for the jewelery than she had paid for them five years ago, but two years of rampant inflation and a sliding pound would likely wipe out any gains. The price of many goods is now determined by the black market value of the dollar, which rose to about 70 pounds to the dollar last month, compared with about 16 before the crisis. “Even the vegetable sellers are worried about the value of the dollar,” said Ms. Hussein’s mother, Tamrihan Abdelhadi. “Everyone is pricing in dollars.”
The family had already sold one of Ms. Abdelhadi’s gold rings to afford the three new rings that a groom’s family traditionally gives an Egyptian bride, and there was still the couple’s apartment to think about.
“It’s so expensive, for example the living room,” Ms Hussein said. “That won’t be enough for it, but it will go into the fund.”
As of early 2022, a crippling foreign currency shortage caused by Russia’s invasion of Ukraine and Egypt’s heavy debt load has sent inflation to record highs and the value of the local currency to plummet to record lows.
The war in Gaza has deepened the crisis, threatening tourism, a key source of foreign currency, and halving Egypt’s dollar revenue from the Suez Canal as Iran-backed Houthi militias attacked ships in the Red Sea .
Egypt imports oil, wheat and many other goods that it must pay for in dollars. This has made United States currency both necessary and scarce, creating a murky black market in which the dollar’s value far exceeds the government’s artificially set exchange rate of about 31 pounds to the dollar.
Seeking financial safe havens, Egyptians with savings began plowing them into gold, real estate and cars—anything they thought would hold its value better than the founding Egyptian pound.
Traditionally, Egyptians bought gold jewelry as a long-term savings strategy, but speculators have now turned to coins and bullion to try to make a quick profit, said Saeed Imbaby, founder of iSagha, a gold trading platform.
Demand for gold doubled and then some, driving up the price. The market became so feverish that the government announced in November that it was working with a financial technology firm to install ATMs that would dispense gold bars instead of cash.
Before the lira began to fall in value, “I never thought about gold, not even jewelry,” said Nermin Nizar, 52, a translator in Cairo. But “in this panic, I needed anything I could to protect the value of my money.”
She put her savings into a single gold coin in September. Its value in pounds has risen by 30%, although inflation would reduce the purchasing power of the profit if it sold now.
Speculation wreaked havoc on the Khan el-Khalili gold market, as shop owners faced an ever-fluctuating price for the raw material they bought to be turned into rings, necklaces and earrings. Many stopped selling altogether.
“I can’t work because I don’t have a fixed price to sell,” said Amir Salah, owner of a small gold jewelry shop. “I don’t even understand that much of what’s going on.”
Now a new uncertainty grips the market, albeit one of optimism. The Emirates, a long-time political ally and financial backer of Egyptian President Abdel Fattah al-Sisi, have already begun transferring billions of dollars to Egypt for the development deal, Mr. El-Sisi said on Wednesday. The president, who until the start of the Gaza war was bleeding popular support, appears to have won a reprieve.
“It’s reassuring,” said Nasser Badawi, the owner of the Bullion Trading Center in Khan el-Khalili, which sells tiny lollipops and baby bottles made of solid gold as gifts for newborns, along with regular bullion that he said became popular investments last year . . “Anything that provides me with funds and helps me get through this crisis, why not?”
Preventing the collapse of the Middle East’s most populous country’s economy has also taken on new urgency for Egypt’s Western partners amid the war in Gaza. The IMF said it would increase a previously agreed $3 billion loan within weeks, with the amount expected to rise to about $8 billion, according to five diplomats in Cairo briefed on the talks.
However, few details about the Emirates deal were available. The funds would avert a default, analysts said, but Egypt risked another crisis if it did not make substantial reforms to cut spending, attract more private investment, produce more exports and reduce the military’s dominance of the economy.
Before the deal, mounting financial pressure had forced the government to make some changes, including freezing some costly major projects ordered by Mr el-Sisi that were saddled with debt, among them a stunning new capital in the desert.
But Egypt now has less incentive to change course.
The deal is a “game changer,” said Tarek Tawfik, president of Cairo Poultry Group and president of the American Chamber of Commerce in Egypt. “The question is how will the money be used?”
