Gold Ends May Down 1.7% Amid Sharp Volatility and Federal Reserve Uncertainty

Gold prices ended May with a loss of approximately 1.7%, despite posting weekly gains of 0.7%, as markets experienced significant volatility driven by geopolitical developments in the Middle East and uncertainty surrounding the future direction of U.S. monetary policy.

The local market is also on track to record a weekly loss of around EGP 55 per gram, while monthly losses are approaching EGP 180 per gram.

Globally, gold gained about $30 during the past week. The metal opened trading at $4,510 per ounce, fell to $4,366, rose to $4,595, and closed the week at $4,540 per ounce.

On a monthly basis, gold lost approximately $77 per ounce during May, declining from $4,617 at the beginning of the month to $4,540 at the close, after touching a two-month low of $4,366.

Despite the monthly decline, gold remains up roughly $222, or 5%, since the start of the year. However, it continues to trade nearly 19% below its all-time high of $5,626 per ounce recorded in January.

Recent gold price movements were heavily influenced by developments surrounding the Iranian file. Prices rose amid reports that the United States and Iran were moving closer to an agreement extending the ceasefire for 60 days, allowing negotiations over Iran’s nuclear program to continue.

These developments contributed to expectations of easing global inflationary pressures, particularly as discussions intensified regarding the reopening of the Strait of Hormuz and the normalization of shipping activity, factors that helped push oil prices lower. Oil recorded its largest monthly decline since 2020.

Meanwhile, U.S. economic indicators continued to send mixed signals. While GDP data pointed to slower economic growth during the first quarter, core inflation continued to rise gradually, maintaining uncertainty over the Federal Reserve’s next policy moves.

Personal income was largely unchanged in April, while disposable personal income declined by 0.1%. Personal consumption expenditures increased by 0.5%, the savings rate fell to 2.6%, and the Personal Consumption Expenditures Price Index rose 3.8% year-over-year. At the same time, the Chicago PMI surged to 62.7 in May from 49.2 in the previous month.

The diversity of economic data has produced conflicting signals for interest-rate expectations. Consumer spending remains resilient and inflation continues to run well above the Federal Reserve’s target, while lower oil prices and stable Treasury yields have helped ease immediate pressure on precious metals.

At the same time, conflicting statements from Federal Reserve officials have heightened investor uncertainty between scenarios of maintaining current interest rates and returning to tighter monetary policy should inflationary pressures linked to energy prices persist.

In a development supportive of global gold demand, China continues to increase its gold imports through Hong Kong. Net imports surged by 81% in April to approximately 86.7 metric tons, according to Hong Kong Census and Statistics Department data.

Chinese banks have also enhanced the attractiveness of gold investment by easing restrictions on gold savings programs, lowering risk classifications, offering fee discounts, and extending trading hours. These measures reflect growing confidence among Chinese financial institutions in gold’s long-term bullish outlook, supported by lower interest rates and a lack of attractive alternative investment opportunities.