Gold prices edge lower in local markets as investors await U.S. inflation data

Gold prices recorded a slight decline in the local market during Wednesday’s trading, despite relative stability in the global ounce price. Rising oil prices have renewed inflation concerns and reduced hopes for interest rate cuts, while safe-haven demand amid the ongoing U.S.-Israeli war on Iran helped limit losses, according to a report by the iSagha platform.

Eng. Saeed Embabi, CEO of the iSagha platform, said that gold prices in the local market fell by about EGP 10 during today’s trading, with 21-karat gold recording around EGP 7,460 per gram.

He added that 24-karat gold reached about EGP 8,526 per gram, while 18-karat gold recorded approximately EGP 6,394 per gram. The gold pound stood at around EGP 59,680.

Globally, the gold ounce stabilized at $5,194.

Dollar strength and Treasury yields weigh on gold

Gold prices held steady on Wednesday as several opposing factors influenced the market. Elevated oil prices revived concerns about inflation and dampened expectations for interest rate cuts. At the same time, a rebound in the U.S. dollar and rising U.S. Treasury yields put pressure on the precious metal.

A stronger dollar increases the cost of gold for holders of other currencies, while higher Treasury yields reduce the appeal of non-yielding assets such as gold.

Oil rebounds amid supply concerns

Oil prices rebounded after yesterday’s decline, indicating that geopolitical tensions remain unresolved. Despite this, gold has traded within a relatively tight range over the past few days, remaining well above the $5,000 per ounce level.

Markets are also questioning whether the International Energy Agency’s plan to release record volumes of strategic oil reserves will be sufficient to offset potential supply disruptions stemming from the Middle East conflict.

Hormuz Strait tensions escalate

The war involving the United States, Israel, and Iran has entered its second week, with ongoing exchanges of airstrikes and missile attacks. The conflict has effectively disrupted shipping through the Strait of Hormuz, a strategic waterway through which roughly one-fifth of the world’s oil and liquefied natural gas supplies pass.

Shipping traffic through the strait has slowed significantly as security risks escalate. The U.S. military also announced the destruction of 16 Iranian vessels believed to have been preparing to deploy naval mines near the waterway.

Markets await key U.S. inflation data

Investors are now turning their attention to key U.S. inflation data, particularly the Consumer Price Index (CPI) for February due later today, as well as the Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve’s preferred inflation gauge—scheduled for release on Friday.

Economists expect the CPI to rise by 0.3% month-on-month in February, accelerating from 0.2% in January, while the annual inflation rate is forecast to remain steady at 2.4%.

The core CPI, which excludes volatile food and energy prices, is expected to increase by 0.2% month-on-month, down from 0.3% in the previous month, while the annual core rate is projected to remain unchanged at 2.5%.

Federal Reserve outlook

Despite the importance of the inflation data, markets widely expect the Federal Reserve to keep interest rates unchanged at the conclusion of its two-day meeting on March 18.

While gold is traditionally viewed as a hedge against inflation, its appeal tends to diminish in a higher interest rate environment.

At the same time, investors fear that a prolonged conflict in the Middle East could keep oil prices elevated for an extended period, potentially complicating the Federal Reserve’s monetary easing path. Such a scenario could strengthen the U.S. dollar and limit further gains in gold prices.