The local bullion market continues to experience subdued activity due to a relative calm in global markets. Retail outlets have largely relied on recycled gold for inventory, especially as bullion traded at slightly lower exchange rates compared to the official rate — about 30 piastres lower in recent days.
However, with Thursday’s trading session, the gap narrowed, bringing market exchange rates in line with official rates as the sector moved toward exporting raw gold to generate foreign currency liquidity.
On the retail front, demand is seeing a seasonal uptick with the approach of the summer wedding and engagement season. Market estimates suggest that around 30% of current demand is directed toward gold jewelry, while the remaining 70% is focused on bullion for savings or investment, particularly with prices stabilizing in the 4620–4660 EGP range for 21-karat gold since the beginning of July.
Stronger Dollar Dampens Gold Demand
The U.S. dollar regained strength following comments from former President Donald Trump, who denied intentions to dismiss Fed Chair Jerome Powell. The reassurance eased market anxiety and pushed the dollar toward its highest level since June 23.
Simultaneously, several Federal Reserve officials signaled caution regarding premature monetary easing. Dallas Fed President Lorie Logan voiced concerns over inflationary risks stemming from tariffs, while New York Fed President John Williams stated that the current economic conditions do not justify immediate policy changes.
These remarks prompted markets to dial back expectations for a rate cut. The likelihood of a 25-basis-point rate cut in September dropped to 63%, down from 78% a week ago, according to CME FedWatch data.
Geopolitical Tensions Offer Underlying Support Amid Fragile Balance
Despite the decline, gold remains supported by geopolitical tensions and global trade uncertainties, particularly after Trump announced new tariffs on 25 countries effective August 1 — a move that heightens global anxiety and renews safe-haven interest in gold.
On the data front, U.S. Producer Price Index (PPI) data came in below expectations, showing no monthly change for June versus a forecast of +0.1%. Year-on-year growth was 2.3%, below the expected 2.5%. The core PPI, excluding food and energy, also registered flat monthly and 2.6% annual growth, indicating softening price pressures from the supply side.
On the flip side, industrial production rose by 0.3%, surpassing forecasts and suggesting economic activity remains resilient despite easing inflation.
Nonetheless, Tuesday’s Consumer Price Index (CPI) report showed core inflation still running hotter than expected at 2.9%, reinforcing pressure on gold due to its inverse relationship with interest rates and the dollar.
the gold market is navigating a fragile equilibrium, caught between dollar strength and potential rate stability on one hand, and global tensions and trade barriers on the other. The next moves in gold will likely hinge on economic and political cues from Washington over the coming weeks.
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