Gold Sees 3% Weekly Increase as Markets Anticipate Fed Rate Cuts

Gold prices in the Egyptian market saw a slight decline on Saturday, coinciding with the global market's weekend pause. Despite this, gold ended the week on a strong note with a 3% increase in global markets, largely driven by a weaker U.S. dollar and growing expectations of a potential 50 basis point interest rate cut by the U.S. Federal Reserve.

Eng. Saeed Embabi, CEO of iSagha, an online platform for gold and jewelry trading, reported a EGP 15 drop in gold prices in local markets compared to Friday’s close.

The price of 21-carat gold, the most popular type in Egypt, settled at EGP 3,475 per gram. Globally, the price of gold saw a sharp rise, with the precious metal gaining $76 over the week to close at $2,579 per ounce, after reaching an all-time high of $2,586 on September 13.

Embabi also detailed the prices for other types of gold in Egypt, with 24-carat gold priced at EGP 3,971 per gram, 18-carat gold at EGP 2,979 per gram, and 14-carat gold at EGP 2,317 per gram. Meanwhile, the price of a gold sovereign (equivalent to 8 grams of 21-carat gold) stood at EGP 27,800.

On Friday, local markets experienced a surge in prices, with 21-carat gold rising by EGP 55 throughout the day. The metal opened at EGP 3,450 per gram, peaked at EGP 3,500, and closed at EGP 3,480. Globally, the price of gold increased by $19, starting the day at $2,560 per ounce, touching a high of $2,586, and closing at $2,579.

Despite the slight dip in local prices, Embabi noted that gold prices in Egypt are currently EGP 51 lower than the international average, when adjusted for the Central Bank of Egypt's exchange rates and global gold prices. He estimated that the fair value of 24-carat gold should be around EGP 4,022 per gram.

Embabi highlighted that gold has gained a remarkable $517—a 25% increase—since the start of the year. This surge has been fueled by several key factors, including central bank purchases of gold, growing speculation that the U.S. Federal Reserve will soon halt its cycle of monetary tightening, and increased demand for gold as a safe-haven asset amid rising global uncertainties, particularly due to escalating tensions in the Middle East.

In addition to institutional purchases, strong demand from retail buyers has also contributed to the metal's upward momentum.

Earlier in the week, the release of the U.S. Consumer Price Index (CPI) for August caused gold prices to dip by $20, bringing the price down to $2,504 per ounce. However, Thursday’s release of the U.S. Producer Price Index (PPI) for August became the key catalyst for the week’s price movements, pushing gold back into positive territory.

Growing expectations that the Federal Reserve will cut interest rates by 50 basis points during its meeting on September 18 have been a major factor in gold’s recent rise. The weak economic data from the U.S. has reinforced predictions of a rate cut, which would make gold more attractive as a non-yielding asset, driving up demand.

Looking ahead, Embabi expects that gold prices will continue to rise if the Federal Reserve follows through on the anticipated rate cut.

He predicts that gold could reach $2,600 per ounce in the short term, although a brief pullback may occur due to profit-taking by investors. However, he believes that prices will resume their upward climb, particularly given the ongoing geopolitical tensions in the Middle East, which tend to boost demand for gold as a safe investment during times of crisis.