Gold Retreats EGP 80 Locally as Markets Assess Consumer Confidence Data and Await Fed Decision

Gold prices declined in both the local market and on the global exchange during mid-trading on Tuesday, amid continued strength in the U.S. dollar and falling oil prices, while investors await the U.S. Federal Reserve's interest rate decision tomorrow, which is considered the most influential factor in determining the direction of the precious metal in the coming period.

It was reported that the price of 21-karat gold per gram fell by about EGP 80 compared to yesterday's closing price, to record around EGP 5,860, while the global ounce fell by about $54 to record $4,030 at the time of preparing the report, according to data from the World Gold Council.

The price of 24-karat gold per gram was recorded at about EGP 6,697, and the price of 18-karat gold per gram reached about EGP 5,023, while the gold pound recorded about EGP 46,880.

It was noted that gold prices had fallen by about EGP 60 during trading yesterday, Monday, as 21-karat gold opened trading at EGP 6,000 and closed at EGP 5,940, while the global ounce rose by about $31, after opening trading at $4,053 and closing at $4,084.

The local decline in gold yesterday, despite the global rise in the ounce, was attributed to the sharp drop in the U.S. dollar exchange rate against the Egyptian pound, which fell from about EGP 51.42 to about EGP 50.60, coinciding with improved performance of the local currency and calm in the geopolitical situation in the Middle East following the cessation of hostilities between the United States and Iran, which was directly reflected in the cost of pricing gold within the Egyptian market.

The dollar exchange rate continued to decline during today's trading by values ranging between 13 and 60 piasters in a number of banks, recording about EGP 50.60 according to data from the Central Bank of Egypt, which continued to put pressure on local gold prices.

The global ounce has risen since the beginning of July by about $13, or 0.3%, compared to the June closing of $4,017, while the price of 21-karat gold per gram in the local market rose by about EGP 175, or 3.1%, compared to the level of EGP 5,685 at the end of June, supported by the effect of the dollar's exchange rate decline on the local pricing mechanism.

The local price premium rose to about EGP 151 per gram, compared to about EGP 122 in yesterday's trading, reflecting the continued widening of the gap between local and global prices.

On a year-to-date performance basis, the global ounce is still down by about $288, or 6.7%, compared to the opening price of the year at $4,318, while the price of 21-karat gold per gram locally increased by about EGP 30, or 0.5%, compared to the opening price of the year at EGP 5,830, reflecting the continued outperformance of the local market over global performance as a result of exchange rate effects and local factors.

The global decline in gold was driven by the rise of the U.S. dollar and the continued decline in oil prices, amid growing hopes of containing tensions between the United States and Iran. U.S. President Donald Trump had announced that talks with Iran are going well, with a chance to reach an agreement, but at the same time warned of the possibility of resuming military operations if negotiations falter, while Tehran denied holding any direct negotiations with Washington.

The Sultanate of Oman proposed a proposal to manage the Strait of Hormuz through a mechanism based on voluntary transit fees, limiting the possibility of one party controlling the shipping lane, which contributed to calming concerns about global energy supplies.

At the same time, oil prices continued to decline for the third consecutive day, losing all the gains recorded last week, which eased the inflationary pressures that had been supporting gold during the past period.

Pressure on markets came in conjunction with U.S. data showing a decline in the Consumer Confidence Index issued by the Conference Board to 90.8 points in July, compared to 92.2 points in June, indicating a decline in American households' confidence in economic conditions.

This data is theoretically considered positive for gold, because it reinforces expectations of a slowdown in the U.S. economy, but investors preferred to wait before the announcement of the Federal Reserve's monetary policy decision tomorrow, as it is the most influential event in determining the direction of the markets.

Markets widely expect interest rates to be held steady within the range of 3.50% to 3.75%, but the possibility of a 25-basis-point hike remains, as estimates from the CME FedWatch tool indicate a probability of about 35%.

Federal Reserve Chairman Kevin Warsh's hawkish stance on inflation has kept these possibilities on the table, which increases investor caution, especially since any surprise rate hike could push gold to break the psychological support level at $4,000 per ounce, given that higher interest rates support the dollar and U.S. Treasury yields.

The most likely scenario is to hold interest rates steady while leaving the door open for a later hike if inflationary pressures persist, which could keep gold under pressure in the coming period. However, if the Federal Reserve adopts a less hawkish tone and considers the rise in energy prices a temporary factor, market bets on a rate hike may decline, giving gold a chance to remain trading above the $4,000 level.

U.S. labor market indicators did not provide strong support for gold, despite preliminary data from ADP showing a slowdown in the pace of hiring in the private sector, after the average number of jobs added during the last four weeks fell to about 15,000 jobs per week compared to about 16,250 jobs in the previous reading, noting that investors preferred to reduce their positions in anticipation of the Fed's decision rather than building new positions based on that data.