Local Gold Prices Decline Despite Global Rally, Premium Falls to EGP 86

Marsad Al Dahab reported that local gold prices declined during Monday's trading despite a rebound in international gold prices, as the stronger U.S. dollar and expectations of prolonged monetary tightening by the U.S. Federal Reserve continued to limit gold's upside potential despite ongoing geopolitical tensions.

The Director of Marsad Al Dahab for Economic Studies stated that local gold prices fell by approximately EGP 30 compared with the close of last week's trading, with 21-karat gold declining to EGP 5,990 per gram. Meanwhile, spot gold rose by about US$55 to US$4,210 per ounce, according to the latest data from the World Gold Council at the time of writing.

Twenty-four-karat gold reached EGP 6,846 per gram, while 18-karat gold traded at EGP 5,134 per gram. The gold sovereign was priced at EGP 47,920.

According to Marsad Al Dahab's data, local gold prices declined by EGP 260, or 4%, over the past week. Twenty-one-karat gold opened trading at EGP 6,280 per gram, climbed to a weekly high of EGP 6,330 before falling to EGP 5,970, and eventually closed the week at EGP 6,020.

Globally, gold prices fell by US$64, or 1.5%, during the same period. The metal opened the week at US$4,219 per ounce, reached a high of US$4,382, and settled at US$4,155 per ounce.

The report also noted that the local market premium declined significantly to EGP 86, compared with EGP 203 at the end of the previous week.

The premium—defined as the difference between the actual domestic gold price and its fair value based on international prices and the official exchange rate—is considered one of the most important indicators of local market conditions, reflecting domestic demand, hedging activity, and supply availability.

The decline in the premium indicates an improvement in the balance of the local market as investment demand for gold bars and coins eased, while supply conditions became more stable, narrowing the gap between domestic prices and their fair value.

In the foreign exchange market, the Egyptian pound continued to strengthen against the U.S. dollar, with the Central Bank of Egypt reporting the average exchange rate at EGP 49.94 per dollar, helping to limit the impact of higher international gold prices on the domestic market.

Internationally, gold prices climbed back above US$4,200 per ounce after ending a three-session losing streak, supported by lower oil prices following mediators' announcement of a 60-day roadmap toward a final peace agreement between the United States and Iran. The development eased concerns over energy supply disruptions and inflationary pressures.

However, gold's gains remained limited as markets continue to expect the Federal Reserve to keep interest rates elevated for an extended period, with another rate hike still possible before year-end. The outlook was reinforced by the hawkish remarks of Federal Reserve Chair Kevin Warsh, who stressed that restoring price stability remains the central bank's top priority, even if economic growth slows.

Analysts at ING noted that gold recorded its third consecutive weekly decline, falling 1.5% as investors reassessed U.S.–Iran negotiations and the outlook for U.S. monetary policy. The bank said that the resumption of oil and LNG flows through the Strait of Hormuz reduced fears of supply disruptions and inflation, weakening safe-haven demand for gold. At the same time, the Fed's hawkish stance strengthened the U.S. dollar and increased pressure on the precious metal.

Nevertheless, ING believes gold will remain highly sensitive to any developments in the Middle East or any shift in market expectations regarding U.S. interest rates.

Investors are now focusing on this week's key U.S. economic releases, particularly the Core Personal Consumption Expenditures (Core PCE) Price Index—the Federal Reserve's preferred inflation gauge—as well as U.S. GDP data.

These indicators are expected to play a decisive role in shaping expectations for future monetary policy. Softer inflation readings could strengthen expectations of future rate cuts and support gold prices, while stronger-than-expected data would likely boost the U.S. dollar and Treasury yields, placing additional pressure on the precious metal.

In its latest weekly report, the World Gold Council (WGC) stated that the shortened U.S. trading week shifted investors' attention to the first Federal Reserve meeting chaired by Kevin Warsh, which markets interpreted as a "hawkish pause." This supported both the U.S. dollar and Treasury yields. Meanwhile, the signing of a Memorandum of Understanding between the United States and Iran improved overall market sentiment.

The WGC added that the U.S. Dollar Index (DXY) breaking above the 100 level could create additional headwinds for gold if the rally continues. However, it also noted that the move could prove temporary if U.S. inflation data comes in below expectations, the Bank of Japan intervenes to support the yen, global growth outside the U.S. improves, or oil flows normalize.

Marsad Al Dahab believes that gold markets are entering a more sensitive phase in which price direction will largely depend on three key factors: U.S. inflation data, the performance of the U.S. dollar, and geopolitical developments in the Middle East.

While geopolitical uncertainty continues to support safe-haven demand, the strength of the U.S. dollar and elevated Treasury yields are likely to limit any substantial upside in gold prices unless the Federal Reserve signals the end of its tightening cycle or geopolitical tensions intensify further.