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Interest Rate Cut Speculations and Geopolitical Tensions Push Gold to Record Highs


Gold Prices

Mon 20 May 2024 | 10:31 PM
Waleed Farouk

Gold prices witnessed a remarkable rise in local markets on Monday, reaching record highs globally. This increase was driven by renewed geopolitical tensions in the Middle East and growing expectations of at least two interest rate cuts by the US Federal Reserve this year.

Saeed Imbabi, CEO of "iSagha," an online platform for trading gold and jewelry, reported that gold prices rose by 20 EGP during today's trading compared to Saturday's close. The price of 21-karat gold reached 3190 EGP per gram after touching 3200 EGP at the start of trading. Meanwhile, an ounce of gold increased by $21, hitting $2435, after reaching an all-time high of $2451.

Imbabi added that the price of 24-karat gold was 3646 EGP per gram, 18-karat gold was 2734 EGP per gram, and 14-karat gold was 2127 EGP per gram. The price of a gold pound was approximately 25520 EGP.

Last week, gold prices in local markets rose by 1.1%, an increase of 35 EGP. The price of 21-karat gold opened at 3130 EGP per gram, peaked at 3170 EGP, and closed at 3165 EGP. Globally, gold prices increased by 2.6%, or $59, opening at $2360 per ounce, reaching $2420, and closing at $2414. Since the beginning of the year, global gold prices have surged by 18%, or $373, starting at $2062 per ounce.

He highlighted that global gold prices reached record highs due to geopolitical tensions in the Middle East. The recent crash of Iranian President Ebrahim Raisi's plane heightened geopolitical risks, prompting investors to seek gold as a safe haven during crises and wars.

Additionally, the growing appetite of emerging central banks for gold has boosted demand for the precious metal. The People's Bank of China announced an increase in its gold purchases, reaching 2264 tons by the end of April, representing about 4.9% of its total reserves. This move aims to diversify foreign currency reserves and partially shift away from the US dollar. China also sold about $53.3 billion worth of US Treasury and agency bonds in the first quarter, according to Bloomberg's calculations based on the latest data from the US Treasury Department.

According to the World Gold Council, central banks bought about 290 tons of gold in the first quarter of this year, highlighting the importance of gold in international reserves amid market volatility and increased risks.

Meanwhile, the Chinese government announced stimulus measures to address the real estate market, including plans to purchase unsold housing units to manage surplus supply and prevent defaults by struggling developers. This is one of Beijing's boldest actions to stimulate economic activity, leading to a strong rise in industrial metals following the announcement.

Imbabi noted that the slowdown in inflation rates, based on the latest US data for April, has increased expectations for a US interest rate cut by September, which could push gold to new record levels in the coming period.