Gold prices in local markets and on the global exchange declined today, Wednesday, influenced by the rising US dollar and escalating inflationary pressures. This comes as global markets anticipate the upcoming summit between US President Donald Trump and his Chinese counterpart, Xi Jinping, amidst ongoing geopolitical tensions related to the war in Iran and the Strait of Hormuz crisis, according to a report issued by the "Marsad Al Dahab" for Economic Studies.
The researcher in gold and jewelry affairs and director of the "Marsad Al Dahab" stated that gold prices fell by approximately 30 pounds during today's trading compared to yesterday's close. The price of 21-carat gold recorded about 6965 pounds, while the global ounce declined by approximately 23 dollars to record 4693 dollars, according to World Gold Council data up to the time of preparing the report.
He added that the price of 24-carat gold recorded about 7960 pounds, and the price of 18-carat gold reached about 5970 pounds, while the price of the gold pound remained stable near 55720 pounds.
He noted that the local market is experiencing a relative weakness in demand, coinciding with an increase in resale operations and some raw material traders turning to exports, which has pushed local prices to trade approximately 43 pounds below the international price.
The report indicated that the local market had witnessed a decline of about 5 pounds during yesterday's trading, Tuesday, where 21-carat gold opened at 7000 pounds and closed at 6995 pounds, while the global ounce fell from 4736 to 4716 dollars.
The report explained that the pressures on gold occurred despite ongoing geopolitical tensions in the Middle East, as oil prices remain near 100 dollars per barrel since the outbreak of the US-Israeli war on Iran and the subsequent disruptions to shipping in the Strait of Hormuz, through which about 20% of global oil and LNG supplies pass.
Oil prices also rose by more than 3% during yesterday's trading, Tuesday, with diminishing hopes for a permanent ceasefire agreement between the United States and Iran, which fueled fears of continued disruption to global supplies and increased geopolitical risk premiums in the markets.
The report confirmed that recent US inflation data came in higher than market expectations, which reinforced bets on the US Federal Reserve maintaining its hawkish monetary policy for longer, especially with continued high energy prices and a strong US labor market.
Rising inflation and US Treasury yields pushed the dollar to its highest level in over a week, pressuring gold for the second consecutive day as a non-yielding asset and increasing the cost of purchasing the precious metal for investors outside the United States.
The report indicated that the US Consumer Price Index rose by 0.6% month-on-month in April, compared to a 0.9% increase in March, while the annual rate accelerated to 3.8% from 3.3%. Core CPI rose by 0.4% monthly and 2.8% annually, with energy prices rising by 3.8% and gasoline by 5.4%.
The report affirmed that these data strengthened expectations that the Fed would keep interest rates high for longer, which historically represents a negative environment for gold and precious metals.
In the same context, the report indicated that markets are now almost completely ruling out any imminent reduction in US interest rates, with forecasts showing high interest rates continuing until the second half of the year, while the CME FedWatch tool still indicates a very limited probability of a rate cut during the upcoming September meeting.
The report added that US President Donald Trump escalated his rhetoric towards Iran, considering that the chances of reaching a permanent agreement have become limited, while Washington and Beijing are preparing for a summit described as crucial for the future of global energy and trade markets, especially with China's heavy reliance on Iranian oil despite US sanctions.
In a notable development, the US Senate approved Kevin Warsh's appointment to the Federal Reserve Board of Governors for a 14-year term, a move that boosted market expectations of continued monetary tightening in the coming period amidst ongoing inflationary pressures.
The report also noted that current geopolitical tensions brought back memories of the 2022 Russia-Ukraine war scenario, when gold initially rose before declining later due to rising inflation, US yields, and a strong dollar.
According to an analysis by ING Bank, gold is not losing its role as a safe haven, but energy shocks and rising oil prices are pushing central banks to keep interest rates high, which temporarily pressures the precious metal.
The report explained that global central bank purchases continue to be a key supporting factor for the gold market in the medium term, as the Chinese central bank resumed buying gold in April by adding 8.1 tons, while Poland continued to strengthen its reserves of the precious metal. Gold-backed investment funds recorded positive cash flows of approximately 6.6 billion dollars in April. ING Bank also predicted that gold would reach 5000 dollars per ounce by the end of the year, despite ongoing fluctuations related to energy prices and geopolitical tensions.
In a related context, the report highlighted recent economic movements in India, after the government raised customs duties on gold and silver imports from 6% to 15%, in an attempt to reduce pressure on foreign exchange reserves and reduce the import bill, especially with rising global oil and gold prices.
Data indicates that Indian gold imports reached approximately 72 billion dollars during the fiscal year 2025-2026, representing one of the largest sources of dollar drain within the Indian economy.
Follow the latest news on Google News
