Fed Signals Another Possible Rate Hike as Bond Yields Pressure Gold and Support the Dollar

Gold prices in local markets and global exchanges declined during Thursday’s trading session, pressured by the strength of the U.S. dollar and rising U.S. Treasury yields, alongside growing uncertainty surrounding geopolitical tensions in the Middle East and investor anticipation of upcoming monetary policy decisions in both Egypt and the United States, according to a report issued by the Gold Observatory for Economic Studies.

The report stated that local gold prices fell by nearly EGP 40 compared with Wednesday’s close, with 21-karat gold trading at EGP 6,800 per gram, while spot gold declined by around $9 to $4,514 per ounce, according to World Gold Council data at the time of publication.

Meanwhile, 24-karat gold recorded EGP 7,771 per gram, 18-karat gold reached EGP 5,829, and the gold sovereign traded at approximately EGP 54,400.

The report noted that gold prices had risen during Wednesday’s trading, supported by safe-haven demand amid escalating geopolitical concerns. The 21-karat price gained EGP 35, while the global ounce climbed nearly $65 after opening at $4,483 and closing at $4,548.

Attention is now focused on the upcoming meeting of the Monetary Policy Committee at the Central Bank of Egypt, as markets remain divided between expectations of an interest rate hold or a limited rate hike aimed at containing inflationary pressures fueled by higher global energy prices and ongoing geopolitical instability.

Analysts believe the Egyptian central bank may continue its “wait-and-see” approach to preserve market stability and contain inflation, particularly after annual urban inflation eased slightly to 14.9% in April from 15.2% in March, according to official data from Egypt’s statistics agency.

However, international institutions, including Goldman Sachs, expect the Central Bank of Egypt to raise interest rates by 1% in anticipation of renewed inflationary pressures during the coming months.

The report stressed that the Egyptian central bank’s decision will directly impact the local gold market, as gold remains one of the most important hedging and savings instruments during periods of economic volatility.

It added that maintaining high interest rates increases the attractiveness of bank deposits and fixed-income instruments, which could temporarily reduce investment demand for gold. On the other hand, keeping rates unchanged or signaling the end of the monetary tightening cycle could boost demand for the precious metal, particularly amid persistent geopolitical risks and elevated inflation levels.

Globally, markets continue to react to the latest minutes of the Federal Reserve meeting, which showed that most policymakers remain committed to a “higher-for-longer” interest rate stance due to persistent inflationary concerns linked to rising energy prices and geopolitical tensions.

The minutes of the Federal Open Market Committee meeting held on April 28–29 revealed that many policymakers believe additional monetary tightening could become necessary if inflation remains above the Fed’s 2% target.

The minutes also reinforced market expectations that any potential U.S. interest rate cuts may be postponed until the second half of 2026 or even early 2027, while the likelihood of another rate hike has increased if inflationary pressures persist.

According to the FedWatch tool from CME Group, traders are currently pricing in a probability exceeding 50% that the Federal Reserve could raise interest rates by 25 basis points during 2026, strengthening the U.S. dollar and pushing Treasury yields higher, which in turn pressured global gold prices.

At the same time, geopolitical tensions in the Middle East continue to keep global markets on edge, particularly amid ongoing tensions between the United States and Iran, conflicting statements regarding the prospects for a peace agreement, and concerns over the Strait of Hormuz and its impact on global energy markets and supply chains.

The report noted that rising oil prices and higher U.S. Treasury yields continue to weigh on gold in the short term, as elevated yields increase the opportunity cost of holding non-yielding assets such as gold, while a stronger dollar boosts demand for cash and fixed-income investments.

Despite current pressures, international analysts believe gold still maintains strong long-term support factors, driven by rising U.S. debt levels, continued central bank purchases, and growing economic and geopolitical risks worldwide.

The Gold Observatory concluded that global markets are currently undergoing a broad repricing of financial assets amid shifting interest rate expectations and escalating geopolitical tensions, leaving markets highly sensitive to any developments related to U.S. monetary policy or the Middle East crisis, while keeping gold within a highly volatile trading range in the short term.