Gold prices decline 0.7% globally over the week amid a stronger dollar and rising bets on tighter Fed policy

Gold prices in local markets declined during Saturday’s trading, coinciding with the weekly closure of global exchanges, after the international ounce recorded weekly losses of around 0.7%. The decline came amid growing expectations that the U.S. Federal Reserve will maintain a tight monetary policy stance in the coming period, alongside persistent geopolitical uncertainty linked to the ongoing conflict in the Middle East, according to a report issued by the Marsad Al Dahab for Economic Studies.

The report stated that local gold prices fell by approximately EGP 10 compared to Thursday’s closing levels, with 21-karat gold recording EGP 6,800 per gram. Meanwhile, the global ounce lost nearly $31 over the course of the week, closing at $4,510, according to data from the World Gold Council.

The report added that 24-karat gold recorded around EGP 7,772 per gram, while 18-karat gold reached EGP 5,829 per gram, and the gold pound coin stood at approximately EGP 54,400. Local markets had already lost nearly EGP 20 during Friday’s trading session, as 21-karat gold opened at EGP 6,830 before ending the session at EGP 6,810.

According to the report, gold faced strong pressure throughout the week due to the appreciation of the U.S. dollar and rising U.S. Treasury yields, which reinforced market expectations for another potential interest rate hike by the Federal Reserve in the coming months, especially amid inflationary pressures driven by higher energy prices resulting from the Middle East conflict.

The report noted that Federal Reserve Governor Christopher Waller warned that the energy shock caused by the conflict could accelerate inflation, stressing that the likelihood of a rate hike has become nearly equal to the possibility of a rate cut in upcoming meetings. Markets are now pricing in a quarter-point rate increase before the end of the year.

It also explained that higher interest rates continue to weigh heavily on gold, as the precious metal does not generate yield, prompting investors to shift toward fixed-income assets and U.S. Treasury bonds as their returns rise. The partial recovery of the U.S. dollar also contributed to weaker investment demand for gold during recent sessions.

At the same time, U.S. economic data showed consumer confidence falling in May to its lowest level on record, according to the University of Michigan Consumer Sentiment Index, which declined to 44.8 points from 49.8 in April. Long-term inflation expectations also climbed to 3.9%, marking the highest reading in seven months and reflecting growing concerns over living costs and persistent inflationary pressures within the U.S. economy.

The report indicated that gold is currently moving within a relatively narrow trading range, as markets balance the negative impact of higher interest rates and a stronger dollar against ongoing geopolitical risks and concerns over slowing global growth, factors that continue to support gold’s appeal as a safe-haven asset over the medium and long term.

The Marsad Al Dahabadded that markets will closely watch a series of key U.S. economic releases next week, including GDP figures, housing market data, and the Core Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve’s preferred inflation gauge — in addition to speeches by Fed officials, all of which are expected to play a major role in shaping the direction of gold and the U.S. dollar in the coming period.