Fed Hints at Monetary Easing as Gold Awaits July Clarity

Gold prices saw a slight dip in local markets during Saturday trading, coinciding with the weekend closure of global exchanges. This came after a modest 0.1% decline in international spot prices over the past week, which was marked by volatility and conflicting pressures from monetary policies and geopolitical tensions.

Gold lost around EGP 5 per gram on Saturday compared to Friday’s close, with 21-karat gold priced at EGP 4,645 per gram. Meanwhile, spot gold dropped by approximately $5 per ounce during the week to settle at $3,350.

The price of 24-karat gold recorded EGP 5,309 per gram, 18-karat gold stood at EGP 3,981, while 14-karat gold reached EGP 3,097. The gold pound was priced at EGP 37,160.

On Friday, gold prices had climbed by EGP 10 during the session, with 21-karat gold opening at EGP 4,640 and closing at EGP 4,650. Globally, spot prices rose by $10, opening at $3,340 and closing at $3,350 per ounce.

Last week, global markets remained in a state of cautious anticipation, driven by speculation of potential political interference in the U.S. Federal Reserve’s operations and renewed trade tensions, particularly from the U.S. toward the EU and Asian economies.

The U.S. Dollar Index slipped by 0.16% on Friday to 98.462 points, despite posting a 0.61% weekly gain. This decline came amid a week of sharp fluctuations triggered by mixed inflation data, political pressure on Fed Chair Jerome Powell, and escalating trade frictions.

While the Consumer Price Index rose, the stagnation in the Producer Price Index cast doubt on the Fed’s monetary trajectory, especially as inflation risks from tariffs persist — reducing the likelihood of a near-term rate cut.

Fed Governor Christopher Waller expressed support for a rate cut in July, citing weaker labor data as justification for a preemptive move.

Concerns over the Federal Reserve’s independence resurfaced following reports that President Donald Trump may be considering replacing Fed Chair Jerome Powell. Although officially denied, such speculation undermines market confidence in the neutrality of U.S. monetary policy, reinforcing gold's status as a safe haven.

Adding to this, the University of Michigan’s July survey revealed an improvement in U.S. consumer sentiment alongside a slight decline in long-term inflation expectations. This potentially provides the Fed with greater flexibility in its policy approach.

The survey showed five-year inflation expectations falling to 3.6% from a previous 4%, while one-year expectations dropped to 4.4% from 5%.

Market expectations currently indicate a total of 45 basis points in rate cuts before year-end — a backdrop that favors gold as a store of value in a low-yield environment. However, the Fed’s cautious stance, with only two rate cuts projected in 2025, continues to limit gold’s momentum as a non-yielding asset.

Trump’s renewed threats to impose tariffs on EU imports, coupled with stalled trade negotiations with Japan and Indonesia, have added further uncertainty to the markets. This has pushed more investors into gold for safety.

Despite gold's relative resilience amid high Treasury yields and a strong dollar, analysts warn of potential pullbacks due to profit-taking after heavy speculative buying in recent months. Still, a major sell-off is seen as unlikely.

The dollar remains supported by expectations that the Fed will hold rates steady throughout the summer unless there is a significant deterioration in economic data — a scenario that diminishes prospects for gold in the short term.

Over the longer term, political tensions may ultimately favor gold. Eroding trust in U.S. financial institutions, particularly in the context of Trump–Powell disputes, could weaken the dollar and drive further inflows into precious metals.

Looking ahead, next week’s U.S. economic calendar includes housing data, global flash PMI readings from S&P, jobless claims, and durable goods orders.

Despite minor declines in both local and global gold prices, the yellow metal remains attractive as a hedge in an increasingly volatile world. U.S. monetary policy remains the most critical driver of gold’s direction — balancing the strength of the dollar against the Fed’s gradual shift toward easing.

With rising geopolitical risks, uncertainty surrounding the Fed’s leadership, and mixed consumer sentiment, gold is expected to maintain a prominent position in investor portfolios heading into Q3 2025.