DUBAI, May 3: 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 everyday,” Moaz Barakat, managing director of the industry-funded World Gold Council in the Middle East, Turkey and Pakistan, said.

“Egyptians were always big buyers of precious metals and this trend is coming back again.” 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 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 downtown 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 tons in 2007, while fourth-quarter demand was up 8.8 per cent at 17.4 tons, making the north African country the best performer in the Middle East.

Egypt’s gold demand is likely to continue double-digit growth over the next five years as the economy expands and tourism grows, Barakat says.

But with the yellow metal prices now at around $850 an ounce, traders say the newly found love for silver, traded at around $17 an ounce, is likely to cut into demand for its costlier rival.

—Reuters