Gold Prices Climb Sharply on Wednesday Amid Weaker Dollar and Cooling Inflation Data

Gold prices posted solid gains in both local and global markets on Wednesday, supported by a weakening U.S. dollar and falling Treasury yields, following the release of inflation data that boosted expectations of a potential Federal Reserve rate cut.

In Egypt, the price of 21-karat gold rose by EGP 40 to reach EGP 4,675 per gram, up from EGP 4,635 at Tuesday’s close. Globally, gold jumped by $43 per ounce to trade at $3,372, compared to $3,329 in the previous session.

Meanwhile, 24-karat gold was priced at EGP 5,343 per gram, 18-karat at EGP 4,007, and 14-karat at EGP 3,117. The gold pound rose to EGP 37,400.

Gold had declined by around EGP 20 on Tuesday amid a global dip in bullion prices before rebounding today as the U.S. dollar index slipped.

U.S. Inflation Data Moves Markets

Fresh data released Wednesday showed unexpected signs of easing inflationary pressures at the producer level. The Producer Price Index (PPI) for June came in flat on a monthly basis, missing forecasts for a 0.2% increase. Year-over-year, the PPI rose 2.3%, also below expectations of 2.5% and May’s reading of 2.6%.

Core PPI, which excludes food and energy, followed a similar trend, registering 0.0% month-over-month and 2.6% annually — both figures coming in below prior estimates.

On the other hand, industrial production rose by 0.3% in June, surpassing expectations of a 0.1% increase, helping ease concerns over an economic slowdown.

These figures suggest weaker cost pressures from the supply side, possibly paving the way for a more accommodative Fed policy — a bullish signal for gold in the short term.

Monetary Policy and Gold: A Cautious Outlook

Despite indications of inflation moderation, Federal Reserve policymakers remain hesitant to shift their restrictive stance without clearer evidence of a sustained decline in price pressures.

On Tuesday, the Consumer Price Index (CPI) report showed headline inflation rising 2.7% year-over-year in June, while core inflation edged up to 2.9% — both exceeding expectations. These figures dampened market hopes for imminent rate cuts, putting downward pressure on gold, which typically moves inversely to interest rates and the U.S. dollar.

Leadership Uncertainty Raises Market Jitters

Market anxiety intensified amid speculation over the future of Fed Chair Jerome Powell. President Donald Trump hinted at the possibility of replacing Powell with Treasury Secretary Scott Besant, although he acknowledged Besant is "not his first choice."

Besant stated that Trump has no immediate plans to remove Powell, but confirmed that formal procedures have begun to consider a potential successor — a move that raises questions about the Fed's independence amid inflationary and political pressures.

Trade Tensions and Geopolitical Risks Bolster Gold's Appeal

Geopolitical and trade-related uncertainties continue to weigh on global markets. Trump has threatened to impose 30% tariffs on imports from the European Union and Mexico starting in August unless new trade agreements are reached.

Conversely, he announced a deal with Indonesia to lower proposed tariffs from 32% to 19%, in exchange for commitments to purchase Boeing aircraft and boost imports of U.S. energy and agricultural products. These developments have pushed investors to increase gold holdings as a hedge against policy volatility.

Central Banks Add to Gold Reserves

According to a recent World Gold Council report, central banks added approximately 20 tonnes of gold to their reserves in May. Kazakhstan led the purchases with 7 tonnes, followed by Turkey and Poland with 6 tonnes each. Singapore, however, sold about 5 tonnes during the same period.

The People’s Bank of China continued its gold accumulation for the eighth consecutive month, adding around 2.2 tonnes in June. Since November, China has purchased a total of 34.2 tonnes (1.1 million troy ounces).

Outlook: Gold Consolidates with Upside Potential

Despite fading hopes of near-term Fed rate cuts, several factors continue to support gold, including a weaker dollar, stable bond yields, and persistent geopolitical and trade risks.

Analysts expect gold to remain within its current trading range unless a strong catalyst emerges. A breakout above the $3,375/oz level could pave the way for a test of $3,450 in the coming weeks — particularly if future inflation data aligns with recent trends in consumer prices.