Poor policies of the governments, politicians, and other financial institutions of the country lead to disasters. We have seen this happening in a number of countries where citizens suffer the poor decisions of governments in terms of inflation and other ways. And historically it is seen that Gold is the most preferable asset when it comes to fighting (or say surviving) against inflation, it is preferred by individuals as well as huge institutions.

1. Egyptian Fiat Crisis, Citizens Bagging Gold

As a result of poor policy-making and international activities, the Egyptian Pound is facing serious depletion against major currencies in the foreign exchanges, especially US Dollar. In the following picture, we can clearly see that the Egyptian Pound has fallen nearly 50% against US Dollar in 2022, which is a huge fall for any country’s fiat. There are multiple reasons behind this fall, such as the Russia-Ukrain war as Egypt largely depends on the imports from these two countries, support of the IMF in a devaluation of the Egyptian Pound, etc.

As seen in the above chart, EGP lost 50% of its value against the USD in the last couple of months. This means the savings of a common Egyptian citizen has also devalued by 50%, this is a tough situation for the common people. To tackle this crisis, many Egyptians are moving towards the traditional stabilizer, Gold! There is a massive rise in the purchase of gold by individuals in order to protect their wealth from further devaluation. The problem with this is the gold value is rising in local markets and it is possible to see the gold bubble there in the upcoming weeks.

2. Central Banks Buying Gold at Historic Rate

Inflation is not limited to Egypt only, it is widely spread across the globe and almost every country in the world facing it, along with it there are signs of the power shifting in the world and everyone is getting ready with a ton of gold in the bag, central banks are no exception.

As seen in the picture above, this third quarter of 2022 is the highest purchase made by the Central Banks since 2010. In this quarter alone, ~400 tons of gold have been purchased. Though I don’t have the statistics of the particular countries buying the gold, my wild guess goes to the Eastern countries should be the largest purchasers of gold.

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