Local Gold Prices Gain EGP 145 in a Week as U.S. Government Shutdown Boosts Safe-Haven Demand

Gold prices in the local market recorded a notable increase of 2.9% during last week’s trading, supported by a 3.4% rise in global prices, amid the ongoing U.S. government shutdown and growing market bets on interest rate cuts by the Federal Reserve, according to a report issued by iSagha, the platform specializing in gold and jewelry trading.

Saeed Embabi, CEO of iSagha, stated that the 21-karat gold gram rose by EGP 145 over the week, opening at EGP 5,075, hitting a record high of EGP 5,250, and closing at EGP 5,220 by the end of the week.

Globally, the ounce surged by $126, opening at $3,760, peaking at an all-time high of $3,900, and closing at $3,886 per ounce.

In local markets, the 24-karat gram recorded EGP 5,966, 18-karat stood at EGP 4,474, 14-karat at EGP 3,480, while the gold pound stabilized at EGP 41,760.

Exceptional Performance and Notable Investment Shifts

After achieving its best monthly performance in decades, gold saw some profit-taking as investors kept prices below the $3,900 mark. The U.S. government shutdown further eroded confidence in the dollar, driving stronger demand for safe-haven assets, particularly gold.

While the economic impact of the shutdown has yet to be fully felt, estimates from the White House Council of Economic Advisers suggest a potential weekly loss of $7 billion in GDP, which could rise to $15 billion per week if the impasse persists.

Betting markets forecast the shutdown could last around 11 days, but even a swift resolution may not repair the reputational damage to U.S. fiscal credibility, amid rising concerns over tariffs and trade policies.

Shift Toward Gold as a Hedge

According to a report from J.P. Morgan, markets are witnessing what is known as a “de-dollarization trade”, as individual investors lose faith in fiat currencies and turn to gold as a hedge against inflation and rising fiscal deficits.

This trend is mirrored by central banks, which have consistently expanded their gold reserves over the past three years.

Morgan Stanley added that gold’s rally has entered a new phase, with retail investors entering the market aggressively.

Data from gold-backed ETFs support this, showing record inflows in September.

The SPDR Gold Shares (GLD)—the world’s largest gold-backed ETF—saw 35.2 tonnes added in September, including a record single-day inflow of 18.9 tonnes on September 19.

However, global ETF holdings remain below 2020 record levels.

Supportive Environment and Ongoing Risks

Several factors continue to support gold prices, including the U.S. government shutdown, which has delayed key economic data such as jobless claims and non-farm payrolls, heightening market uncertainty and encouraging caution among investors.

Federal Reserve Governor Steven Miran emphasized the need for economic data to guide monetary policy, urging a forward-looking approach amid data disruptions.

Meanwhile, Austan Goolsbee, President of the Chicago Fed, noted that markets are already pricing in rate cuts, though policy decisions must remain data-driven.

U.S. Treasury yields declined, with the 10-year yield falling to 4.11%, while real yields rose to 1.77%.

Economic indicators signaled a slowdown, with the ISM Services PMI dropping to 50, and ADP data showing a decline in private-sector employment.

The Prime Market Terminal tool shows a 96% probability of a 25 basis point rate cut at the October 29 meeting.

Central Bank Purchases Reinforce Bullish Trend

Global central banks resumed gold purchases in August, adding 15 tonnes after a temporary pause in July.

The largest buyers included Kazakhstan (8 tonnes), alongside Turkey, China, Bulgaria, Ghana, Czech Republic, and Uzbekistan, while Russia and Indonesia were the only sellers.

Poland leads global buyers, having added 67 tonnes so far this year, lifting gold’s share of its reserves from 20% to 30%.

China’s reserves rose to 2,300 tonnes (7% of total reserves), while Turkey holds 639 tonnes.

The report concludes that mounting global economic pressures are prompting central banks and investors to increase their gold holdings as a safe-haven asset and an effective hedge against financial volatility and currency depreciation.