Gold Jumps After Softer U.S. Inflation Data as Stronger Dollar Supports Egyptian Market

Gold prices rose in both the Egyptian market and international exchanges during Tuesday's mid-session trading, driven by a sharp rebound in global bullion prices after U.S. inflation data came in below market expectations, strengthening expectations that the Federal Reserve may ease its monetary tightening path in the coming meetings.

The price of 21-karat gold, Egypt's most widely traded benchmark, climbed by around EGP 85 compared with Monday's close to approximately EGP 5,900 per gram. Meanwhile, spot gold gained about US$84 to trade at around US$4,086 per ounce, according to World Gold Council data available at the time of writing.

The price of 24-karat gold reached approximately EGP 6,743 per gram, while 18-karat gold traded at around EGP 5,057 per gram. The gold sovereign coin was priced at roughly EGP 47,200.

Local gold prices had declined by about EGP 35 during Monday's trading session, with 21-karat gold opening at EGP 5,850 per gram and closing at EGP 5,815. Globally, gold lost around US$18 an ounce after opening at US$4,020 and ending the session near US$4,002 per ounce.

The rebound in Egypt's gold market came in tandem with the strong recovery in international bullion prices, supported by a weaker U.S. dollar and lower U.S. Treasury yields, which renewed investor demand for gold as a safe-haven asset.

The latest U.S. Consumer Price Index (CPI) data showed annual inflation slowing to 3.5% in June from 4.2% in May, while core inflation remained unchanged on a monthly basis. The figures came in below market expectations, prompting investors to scale back forecasts for additional Federal Reserve interest rate hikes.

As a result, international gold prices surged by more than 2% during Tuesday's session, benefiting from the decline in the U.S. Dollar Index and easing Treasury yields, which improved the appeal of non-yielding assets such as gold.

Egypt's gold market also received additional support from the recent rise in the U.S. dollar against the Egyptian pound, amid renewed foreign portfolio outflows from the local debt market. Recent data showed that hot money outflows reached approximately US$893 million in a single day, increasing demand for the U.S. dollar and pushing the exchange rate higher, which directly lifted domestic gold prices.

Gold pricing in Egypt is primarily determined by three key factors: international gold prices, the U.S. dollar exchange rate against the Egyptian pound, and the local market premium driven by supply and demand conditions. The combination of stronger global bullion prices and a higher exchange rate amplified gains in the domestic market.

The dollar's performance against the Egyptian pound is expected to remain one of the main drivers of local gold prices, even during periods when international gold prices are relatively stable. Conversely, any easing in the exchange rate could reduce the impact of global price increases on the Egyptian market.

Investors are now turning their attention to Wednesday's U.S. Producer Price Index (PPI) data, as well as Federal Reserve Chairman Kevin Warsh's testimony before Congress, both of which are expected to provide important signals regarding the future direction of U.S. monetary policy and, consequently, gold prices.

While softer inflation may allow gold to recover further from its recent losses, markets are expected to remain highly sensitive to any comments from Federal Reserve officials that could revive expectations of tighter monetary policy, suggesting that price volatility is likely to persist in the near term.