Economic Factors Weigh on Global Gold Prices as Markets Await Fed Policy Shift

Gold prices in Egypt saw a slight increase on Saturday, coinciding with the weekly closure of global markets, following a notable decline of 1.8% in the international ounce price by the end of trading on Friday. This came despite renewed tensions and intensified military confrontations in the Middle East.

Locally, gold prices rose by EGP 15 compared to Friday's closing, with 21-karat gold reaching EGP 4800 per gram. Meanwhile, the global ounce price fell by $61 over the week to settle at $3369.

The 24-karat gold recorded EGP 5489 per gram, 18-karat stood at EGP 4114, The gold pound (8 grams of 21K) was priced at EGP 38400.

This marks the first weekly decline in gold prices in nearly three weeks. Interestingly, the metal failed to capitalize on the geopolitical escalation in the region, instead recording a noticeable drop in international markets.

Several economic and investment-related factors have curbed gold’s upward momentum, limiting the impact of political events. Chief among these are the strong U.S. dollar and weak demand from China, both at the level of the central bank and retail consumers.

According to official data, the People’s Bank of China purchased only 1.9 metric tons of gold in May 2025, compared to 2.3 tons in both March and April, and a peak of 10 tons in December 2024.

Although gold still constitutes approximately 7% of China’s official reserves, this ratio has not seen significant growth—raising questions about Beijing’s future monetary stance toward the yellow metal.

Gold also faced selling pressure in Asian markets, particularly in India, where investors engaged in profit-taking after a rapid price rally. This increased supply and contributed to price declines.

Despite a moderate slowdown in U.S. inflation indicators, the Federal Reserve has remained committed to keeping interest rates unchanged. This policy stance enhances the appeal of fixed-income instruments like bonds, while diminishing gold’s allure—since gold offers no yield and becomes more attractive only when interest rates are low.

In a surprising shift, Federal Reserve Governor Christopher Waller stated that a rate cut could begin as early as the July 2025 meeting, if the current moderate trajectory of economic data continues.

Waller, known for his traditionally hawkish views, appeared more flexible this time, acknowledging room for interest rate cuts, while maintaining readiness to reverse course if economic shocks occur. This nuanced tone signals a possible pivot in Fed policy.

He also downplayed the inflationary impact of tariffs, noting that a proposed 10% tariff on all imports would not have a significant effect on overall prices—reducing the likelihood that such tariffs will be used to justify further monetary tightening.

If realized, a U.S. rate cut may open the door for renewed investment flows into Egypt, contingent on relative currency stability and a decline in Egypt’s sovereign credit default swap (CDS) rates.

Waller’s remarks represent the first serious signal toward the end of the current tightening cycle, though any rate reduction remains highly dependent on future economic data.

Looking ahead, markets await a raft of key U.S. economic indicators, including:

S&P Global flash PMI on Monday,

U.S. consumer confidence report and Fed Chair Jerome Powell’s testimony before the House Financial Services Committee on Tuesday,

New home sales data and Powell’s testimony before the Senate Banking Committee on Wednesday,

Weekly jobless claims, durable goods orders, final Q1 GDP, and pending home sales on Thursday,

Core PCE inflation data on Friday.

These figures are likely to shape both Fed policy and investor sentiment in the coming weeks.