Gold Tumbles as Middle East Tensions Ease

Gold prices declined in local markets during Tuesday's trading and the ounce on the global stock market fell.

The drop was affected by haven demand waning after geopolitical tensions eased in the Middle East and the US data improvement.

Said Imbabi, Executive Director of the “i-Sagha”, said that gold prices fell in local markets by EGP 10 during the transactions compared to the end of yesterday’s trading, in which the gram of 21-karat gold recorded EGP 3450 and an ounce on the global stock exchange declined by $11 to record $2507.

He added that the 24-karat gold reached EGP 3943, 18-karat registered EGP 2957, 14-karat gold sold at EGP 2300, and the gold pound hit EGP 27600.

On the other hand, gold prices declined in the local markets by EGP 5 during yesterday's trading.

The 21-karat opened trading at EGP 3465 and closed at EGP 3460. Meanwhile, the ounce rose on the global stock market by $6, with transactions beginning at $2512 and concluding at $2518.

Imbabi explained that gold prices in local markets and the global stock exchange declined as fears of a wider conflict in the Middle East region dissipated, in turn, led to a decline in demand for the precious metal, coinciding with the release of positive US economic data.

The data released Monday revealed that US durable goods orders rose by 9.9% in July, the highest reading since May 2020, which will help dispel some of the speculations about the US economy, and in turn lowered expectations about a smaller interest rate cut.

The possibility of the Federal Reserve cutting interest rates by 0.50% in September instead of the standard 0.25% cut decreased.

Imbabi added Federal Reserve Chair Jerome Powell's statements at Jackson Hole affirmed the potential reduction in interest rates at the next September meeting and also strengthened the possibility of a reduction of 0.5% instead of 0.25%.

He pointed out that Powell's statements that "it is time to adjust policy" represent an important turning point in the US Federal Reserve's approach, which will cast its shadow on financial markets in the coming period.

Imbabi pointed out that the gold market's reaction to Powell's speech and potential monetary policy shifts confirms the complex relationship between monetary policy and economic indicators.

He added gold's role as a safe haven and hedge against economic uncertainty has been achieved.

Imbabi noted gold may witness a state of correction or stability at current price levels.

He added that the coming weeks represent a critical period for gold, with the Federal Open Market Committee meeting approaching in September, and markets awaiting the US Federal Reserve's decision on the pace and extent of interest rate cuts.