A Turbulent Week for Gold… Oil and the Dollar Control Prices

Gold prices in the local market recorded a slight increase of about 0.1% during last week’s trading, while the ounce declined on the global market by about 10.4%, amid sharp volatility driven by the US dollar and the repercussions of geopolitical tensions.

Local gold prices rose by about 10 Egyptian pounds during the week, as the 21-karat gold gram opened trading at 6,915 pounds, touched 6,730 pounds, and closed at 6,925 pounds.

The price of 24-karat gold reached about 7,914 pounds, while 18-karat gold recorded about 5,936 pounds, and the gold pound coin reached approximately 55,400 pounds. Embabi added that the local market is trading at a premium of 292 pounds above the global price based on the Central Bank exchange rate, amid weak demand.

Globally, the ounce opened trading at $4,497 and touched its lowest level in four months at $4,098 on Monday before closing at $4,494 on Friday, recovering part of its losses amid sharp fluctuations between $4,100 and $4,600.

Factors Influencing Gold

Gold is currently influenced by several factors beyond its traditional role as a safe haven, most notably rising oil prices, with Brent crude exceeding $110 per barrel, increasing inflationary pressures on the global economy.

At the same time, the strength of the US dollar, whose index reached 100.17, limits gold’s attractiveness to investors. US Treasury yields also play an additional role, as 10-year Treasury yields stabilized at 4.438%, making bond investments more attractive compared to gold, which does not yield interest.

Federal Reserve officials pointed to difficulties in monetary policy due to energy price shocks. Anna Paulson, President of the Federal Reserve Bank of Philadelphia, warned about rising fuel and fertilizer prices and their impact on inflation.

Thomas Barkin, President of the Federal Reserve Bank of Richmond, described the oil price shock as another layer of “fog” over monetary policy and called for keeping interest rates unchanged until the outlook becomes clearer.

Price Movements and Market Reactions

Thursday saw the biggest drop of the week, with spot gold falling 2.7% to $4,384.38 due to the rise in the dollar and oil prices.

However, Commerzbank raised its year-end gold price forecast to $5,000 per ounce instead of $4,900, noting that the recent decline may be temporary.

Lower prices contributed to a slight increase in physical demand, as dealers in India reduced discounts to $61 per ounce from $75 last week, while premiums in China fell to between $14 and $18.

However, the recovery remains fragile, as rising oil prices and continued dollar strength could increase traders’ bets against interest rate cuts, putting further pressure on gold.

Economic Data and Its Impact

Markets are awaiting US jobs data due on April 3, after Reuters expectations of 55,000 job gains and the unemployment rate remaining at 4.4%.

These data will be a major driver for gold prices, especially with continued monetary tightening and no expected interest rate cuts in 2026, according to the CME FedWatch tool, with a 35% probability of rate hikes by the end of the year.

University of Michigan data also showed a decline in US consumer confidence in March, along with rising short-term inflation expectations, reinforcing expectations of continued tight monetary policy.

Central Bank Activity

Recent data revealed that the Turkish central bank liquidated about 60 tons of gold over the past two weeks, either through direct sales or swap operations to obtain liquidity of about $8 billion, reducing reserves to about 772 tons, the lowest level in 13 months.

Analysts indicated that these operations do not reflect a full exit from gold, as they were mostly used as collateral for temporary liquidity, but repeated operations by other central banks could put downward pressure on gold.

Geopolitical Tensions and Safe-Haven Demand

Gold prices rose again to approach $4,500 per ounce, supported by tensions in the Middle East, especially after Israeli strikes on Beirut and Iranian missiles targeting the Saudi capital, which boosted safe-haven demand despite the strong dollar and rising US bond yields.

However, markets witnessed a broad sell-off that pushed gold down about 15% during the current month and 16% since the outbreak of the US-Israeli war against Iran on February 28, affected by the rise of the US dollar.

Long-Term Market Outlook

Despite the pressures, opportunistic buyers have begun returning to the market taking advantage of lower prices, supporting the long-term upward trend for gold.

Financial centers in Asia such as Hong Kong and Singapore are also working to strengthen their role in the gold market through clearing systems and increasing storage capacity, reinforcing gold’s position as a strategic reserve asset amid global uncertainty.

Markets are now watching upcoming US economic data, including the labor market, consumer confidence, and retail sales, to determine monetary policy direction and the future direction of gold prices.