Gold Temporarily Loses Its Luster as Dollar Rises and Interest Rate Cut Bets Recede

Gold prices witnessed a noticeable decline in local and global markets during Monday's trading, affected by the rise of the dollar and large-scale sell-offs, amid renewed geopolitical fears in the Middle East. These fears pushed oil prices up and sparked inflation concerns, leading to a reduction in expectations regarding U.S. interest rate cuts this year, according to a report by the "Marsad al-Dhahab" for Economic Studies.

Dr. Walid Farouk, a researcher in gold and jewelry affairs and Director of the "Marsad al-Dhahab," stated that gold prices in the local market fell by about 30 pounds during today's trading compared to the close of last week—Saturday evening—recording about 7,130 pounds for 21-karat gold. 

Meanwhile, the ounce on the global exchange dropped by about $42 to record $4,708 at the time of writing the report, according to World Gold Council data. 24-karat gold recorded about 8,149 pounds, 18-karat about 6,112 pounds, while the price of the gold sovereign reached about 57,040 pounds. 

The report pointed out that the gap between local and global prices widened to about 111 pounds, as the local price was lower than the global one due to weak domestic demand and the market's direction toward exportation.

Gold prices in the local market had risen by about 10 pounds during the week, where 21-karat gold opened trading at 7,150 pounds and touched 7,250 pounds before closing at 7,160 pounds. Globally, the ounce rose by about $74 during the week, opening at $4,676 and exceeding the $4,800 level before ending the week at $4,750.

 As for silver prices, the report noted a decline in the local market by about one pound, with 999-grade silver recording 132 pounds, 925-grade 122 pounds, and 800-grade 106 pounds, while the silver sovereign price reached 976 pounds. Meanwhile, the global ounce fell by about two dollars on the global exchange to record $74, according to World Silver Institute data. 

Silver prices had declined in local markets by 1.5% last week, a value of two pounds, as 999-grade silver opened at 135 pounds and closed at 133 pounds. Globally, the silver ounce rose by 4%, a value of 3 dollars, opening at $73 and closing at $76.

The report indicated that the decline in gold was driven by escalating inflationary fears following the failure of peace talks between the United States and Iran, which increased the chances of energy supply disruptions, especially with the threat of a blockade on the Strait of Hormuz, pushing oil prices up to about $105 per barrel.

 It added that the rise of the dollar—near its highest levels in a week—strengthened the pressure on gold by increasing its cost for holders of other currencies, at a time when expectations for interest rate cuts declined with U.S. inflation rising to 3.3% annually, according to official data.

The probability of a U.S. rate cut fell to only about 16% by December, according to the FedWatch tool, which supported bond yields and the dollar and weakened the attractiveness of non-yielding gold.

 The Director of the "Marsad al-Dhahab" confirmed that markets remain under the pressure of geopolitical tensions amid fears of the collapse of the fragile ceasefire between the U.S. and Iran and the possibility of new military escalation, which is re-pricing war risks in global markets. 

Although gold is considered a traditional safe haven, it has lost more than 10% of its value since the conflict broke out at the end of February due to investors turning toward liquidity and the dollar, before recovering part of its losses later with rising fears of an economic growth slowdown.

 In a related context, markets are anticipating a set of U.S. economic data in the coming period, most notably the Producer Price Index and employment data, along with geopolitical developments, especially regarding the Strait of Hormuz and the path of U.S.-Iranian relations, which will remain the decisive factor in determining gold trends in the next stage.