Gold Prices Rebound as U.S. Dollar Weakens Amid Rising Geopolitical Risks

Gold prices rose in local markets on Monday as global prices climbed, fueled by a weakening U.S. dollar and escalating geopolitical risks. However, the gains were tempered by reduced expectations of interest rate cuts by the U.S. Federal Reserve.

According to Engineer Saeed Imbaby, CEO of the "iSaaga" platform for trading gold and jewelry online, gold prices in local markets increased by about EGP30 during Monday’s trading compared to Saturday evening. A gram of 21-karat gold, a popular benchmark in Egypt, was priced at EGP3,585, while the global price of an ounce rose by $32, reaching $2,595.

Imbaby added that prices for other gold categories also saw increases. A gram of 24-karat gold recorded EGP4,097, 18-karat gold was priced at EGP3,073 per gram, and 14-karat gold reached EGP2,390 per gram. Additionally, the price of a gold pound (8 grams of 21-karat gold) rose to EGP28,680.

Weekly Trends Show Declines in Gold Prices

Despite Monday’s recovery, the "iSaaga" platform’s weekly report revealed a sharp decline in gold prices last week. Local markets saw a 5.6% drop, with 21-karat gold falling by 205 pounds, opening the week at EGP3,760 and closing at EGP3,555. On the global stage, gold prices dropped by 4.5%, with the ounce declining by $121, from $2,684 to $2,563.

Drivers of Monday’s Recovery

Imbaby attributed Monday's rise in gold prices to the weakening dollar and heightened geopolitical risks in the Middle East and the ongoing conflict between Russia and Ukraine. These developments have historically driven investors toward gold as a safe-haven asset.

However, he noted that optimism surrounding U.S. economic policies, including potential inflationary pressures from expansionary measures and debt-financed tax cuts, has bolstered the dollar and U.S. Treasury yields. This optimism, coupled with reduced bets on interest rate cuts by the Federal Reserve, has limited gold’s gains.

Outlook for Gold Prices

Last week, gold prices experienced their largest weekly decline since September 2023, reaching their lowest levels in over two months. The rise in the U.S. dollar to its highest point in more than a year played a significant role in this downturn.

Looking ahead, Imbaby expects geopolitical tensions to continue driving demand for gold as a hedge against uncertainty. He noted that market focus will remain on global economic indicators and the Federal Reserve’s monetary policy.

Market Insights and Federal Reserve Comments

Federal Reserve Chairman Jerome Powell recently emphasized the resilience of the U.S. economy, a strong labor market, and inflation above the 2% target as reasons to approach interest rate cuts cautiously. Boston Fed President Susan Collins hinted that a December rate cut remains possible but is not guaranteed. 

Meanwhile, Chicago Fed President Austan Goolsbee stated that progress toward the 2% inflation target could eventually lead to lower interest rates.

This week, markets are closely watching key economic data, including housing statistics, initial jobless claims, and global Purchasing Managers’ Index (PMI) reports, for further clues on the Federal Reserve’s direction.