Gold Prices Surge by EGP 105 in Local Markets Over a Week

Gold prices in local markets rose by 2.1% last week, driven by a 2% increase in the global price per ounce. This was fueled by rising global demand for safe-haven assets, escalating geopolitical tensions, and growing expectations for a cut in U.S. interest rates, according to a report by "iSagha," a platform specializing in gold and jewelry trading.

Saeed Embaby, the Executive Director of iSagha, stated that the price of 21-karat gold, the most traded in the Egyptian market, increased by EGP 105 during the week. It opened at EGP 4,970, reached an unprecedented historical high of EGP 5,100, and closed the week at EGP 5,075.

Globally, the price per ounce jumped by $75. It began the week at $3,685, climbed to a historical high of $3,791 on September 23, and closed at $3,760 per ounce.

Embaby also noted that the price of 24-karat gold was around EGP 5,800, 18-karat was EGP 4,350, and 14-karat reached EGP 3,384. The price of an ounce of gold remained stable at EGP 40,600.

Gold in local markets is nearing the end of September with a potential gain of more than EGP 385, or close to 11%. Globally, the ounce could see gains of around $313, or 9%.

Precious Metals Witness Historic Global Rally

Global markets are experiencing a strong rally in precious metals that has been going on for three years. Gold is leading the way, having surged by 43% since the start of the year, followed by silver with a 55% increase and platinum with a 71% gain, all reaching unprecedented price levels.

Since early January, the spot price of gold has soared by 43% to $3,760 per ounce, outperforming most asset classes. This is its strongest annual performance since 1979, when it jumped by 126% amid the Iranian Revolution and the oil price shock.

According to Bank of America data, gold funds saw massive inflows of $5.6 billion in a single week and $17.6 billion in just four weeks, setting a new record.

Despite the bank's warning of short-term "buying saturation," it confirms that gold remains "under-owned" in the long term, representing only 0.4% of retail clients' assets. This supports the continuation of the upward trend, and the bank maintains its "buy" recommendation.

Analysts believe these increases are not random but reflect a combination of macro factors, including worsening global sovereign debt, an expected weakening of the U.S. dollar as central banks move toward cutting interest rates, growing official demand for gold from central banks, and ongoing geopolitical tensions that drive investors toward safe havens.

Gold's gains have been further bolstered by rising expectations for a U.S. interest rate cut, with indicators showing a slowdown in the labor market and a decline in consumer confidence, which strengthens investors' bets on an extended period of monetary easing.

Supportive Economic Data

Data from the U.S. Department of Commerce showed that the Personal Consumption Expenditures (PCE) price index—the Fed's preferred measure of inflation—remained below the 3% level. The core index for August was 2.9% year-over-year, while the headline index rose to 2.7% from 2.6% in July, increasing the chances of an interest rate cut later in the year.

While the cost of living continues to rise, the slowdown in the pace of inflation encourages markets to price in an earlier rate cut.

Conversely, the University of Michigan Consumer Sentiment Index fell to 55.1 points in September, below the forecast of 55.4 points. Expectations for one-year inflation decreased to 4.7%, and for five years to 3.7%.

Statements by Fed Officials

Several Federal Reserve officials expressed concern about the fragility of the labor market. Michelle Bowman, a member of the Board of Governors, stated that recent data showed weakness in job growth and that inflation, excluding the effects of tariffs, was close to the target.

Thomas Barkin, President of the Federal Reserve Bank of Richmond, explained that consumer spending remains relatively strong but urged caution given the new tariffs imposed by President Donald Trump on medicine and furniture imports.

Bond Yields and Market Expectations

U.S. Treasury yields saw a slight increase, with the 10-year bond yield reaching around 4.187%, while real yields after inflation reached 1.807%.

The CME FedWatch tool shows that markets are pricing in an 88% probability of an interest rate cut in October and a 65% chance of an additional cut in December.

Government Shutdown Fears and U.S. Debt

Demand for gold is also rising amid fears of a new U.S. government shutdown as Congress negotiations to pass funding legislation before September 30 have stalled. Even if a temporary agreement is reached, the continued rise in U.S. public debt weakens confidence in the dollar and reinforces gold's status as a safe monetary alternative.

Gold-Backed Investment Funds

The SPDR Gold Shares (NYSE: GLD), the world's largest gold-backed exchange-traded fund, recorded its largest single-day inflow in its history last week, adding more than 18 tons. This is a clear sign of a strong return in investment demand, even though total global holdings are still below their 2020 peak.

Analysts confirm that despite its rise, the market is far from being overvalued, thanks to continued strong demand from central banks, especially the People's Bank of China, which is estimated to be buying around 33 tons per month since 2022. This pace is expected to continue for years to achieve a balance with the reserves of developed countries.

Silver and Platinum Surge

Gold was not the only metal to benefit from the rally. Silver rose to its highest level in 14 years, exceeding $46 per ounce, with an increase of over 7% during the week.

Sprott analysts expect that increasing industrial demand and supply shortages will sustain the rally, similar to what happened with palladium, which rose by more than 500% between 2016 and 2021.

Platinum also continued its gains, supported by rising industrial demand and a decline in supplies from South Africa, with jumps of 71% since the beginning of the year.

Investors are awaiting a set of important U.S. data next week, including a series of statements from Federal Reserve officials, the ADP National Employment Report, the ISM Manufacturing PMI, initial jobless claims, and September non-farm payrolls.

These indicators will be crucial in determining the path of U.S. monetary policy during the last quarter of the year, thus shaping the future direction of gold and other precious metals prices.