Global gold markets have recently witnessed sharp volatility, with the precious metal recording noticeable declines despite rising geopolitical tensions and higher energy prices—contrary to the traditional pattern in which gold tends to rise during periods of crisis.
In an in-depth analytical reading, economic analyst Osama Zariei said that understanding gold’s movement cannot be separated from the broader macroeconomic structure that drives global pricing, noting that the market is built on four main pillars: central bank purchases, real interest rates, the strength of the U.S. dollar, and investor sentiment or risk appetite in financial markets.
Four Pillars Driving Global Gold Pricing
Zariei explained that gold does not move randomly but follows a complex equation. Real interest rates carry the largest weight in pricing, followed by central bank activity, then risk appetite, while the U.S. dollar strength determines the overall direction of the market.
He pointed out that gold theoretically moves inversely with real interest rates, in addition to the impact of central bank purchases, which historically translate into price increases ranging between $50 and $150 for every 100 tons of net buying.
He also noted that geopolitical risk, although not measurable through a precise formula, is ranked on a scale from 1 to 10, and when it rises sharply, it can trigger movements ranging from $500 to $1,000 during major crises.
Liquidity Distortions and Dollar Shock
Zariei stated that the recent decline in gold is not the result of a structural shift in trend, but rather what he described as a “liquidity shock.” Some sovereign funds and banks were forced to sell part of their gold reserves to generate dollar liquidity amid rising financing needs and pressure on local currencies in several economies.
He added that actions by certain countries, including Turkey, contributed to partial gold sales to support foreign reserves and address balance-of-payments gaps, which was reflected in global prices.
Geopolitical Pressure and Energy Disruptions
Zariei explained that geopolitical developments, particularly in sensitive energy supply regions such as partial disruptions in the Strait of Hormuz, have caused turbulence in oil markets. This, in turn, affected foreign currency flows in several economies and significantly increased demand for the U.S. dollar.
He noted that this situation created what he called a “dollar shock,” as demand for the dollar surged to settle international obligations, while assets such as gold temporarily declined as a source of liquidity.
Central Banks Still Support Gold
Zariei confirmed that the strategic direction of central banks has not changed, emphasizing that they continue to maintain strong demand for gold, especially from emerging economies and countries seeking to diversify reserves away from the U.S. dollar.
He added that long-term projections still point toward higher price levels, potentially reaching $6,000 per ounce in the coming years under multiple scenarios.
Local Market Between External Pressure and Exchange Rate Movements
Zariei pointed out that the local market is facing pressure due to higher import costs and currency fluctuations, in addition to capital outflows, which have increased demand for the dollar and raised its cost.
He explained that this environment could push inflation higher in the coming period, potentially by 10% to 15%, if current conditions persist without stabilization.
The Debate Over the “Goldsmith Dollar”
Regarding local gold pricing, Zariei explained that what is referred to as the “goldsmith dollar” reflects cost differentials and premiums driven by import expenses, supply and demand conditions, rather than representing a separate parallel market.
He noted that markets naturally apply premiums and discounts, as seen in global markets such as China, where bullion trades at varying premiums depending on market conditions.
Gold as a Strategic Asset, Not Short-Term Speculation
Zariei stressed that gold remains a long-term strategic asset, warning against treating it as a short-term speculative instrument due to its sharp volatility, which can reach hundreds of dollars in a single trading session.
Silver: Global Deficit Supports Long-Term Uptrend Despite Volatility
Regarding silver, Zariei highlighted a structural global deficit between supply and demand, particularly due to rising industrial demand in solar energy and electronics sectors.
He explained that each physical silver bar is traded multiple times in paper markets, creating a gap between paper pricing and real physical demand.
Despite recent declines, he confirmed that the long-term trend remains upward, with targets potentially reaching $135 per ounce or higher if supply deficits continue.
Monetary Policy and Interest Rate Outlook
Zariei noted the possibility of interest rate stabilization in Egypt in the coming period, as policymakers await clearer signals on global inflation trends, particularly in the United States, where data remains inconclusive regarding monetary policy direction.
Zariei concluded that the current movements in gold and silver markets do not represent a structural shift in trend, but rather a temporary liquidity shock combined with overlapping geopolitical and financial pressures.
He emphasized that the continuation of global debt imbalances and sustained institutional demand for gold support a long-term bullish outlook, despite sharp short-term volatility.
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