Gold and silver markets witnessed a sharp, long-anticipated price correction, following a historic nine-week rally. The correction was driven by the rise of the dollar, a decline in actual demand from major Asian markets after the Diwali season in India, and an improvement in sentiment in global markets after positive signs of a potential breakthrough in trade relations between Washington and Beijing. This combination prompted investors to take profits after reaching record highs.
Said Imbabi, CEO of the "I Sagha" platform specializing in gold and jewelry trading, stated that gold prices fell by approximately 120 EGP during today's trading. The price of 21-karat gold recorded 5,470 EGP, while the ounce dropped by about 92 USD to record 4,018 USD.
He added that 24-karat gold recorded 6,251 EGP, 18-karat gold was about 4,689 EGP, and 14-karat gold was around 3,647 EGP, while the price of the gold pound stabilized at 43,760 EGP.
Successive Declines After a Historic Peak
Gold prices in the local market had fallen by approximately 285 EGP yesterday, after the 21-karat gold gram opened trading at 5,875 EGP and closed at 5,590 EGP. Globally, the ounce dropped by about 238 USD, from 4,348 USD to 4,110 USD per ounce.
The slump came amidst profit-taking sales after gold reached its historical high of 4,381 USD per ounce on Monday, before falling on Tuesday's session by 6.3% to 4,082 USD—its biggest percentage drop since 2013. This coincided with a 5.7% drop in US futures contracts at 4,088 USD. Silver also fell by 7% and platinum by about 5% in the same session.
Healthy Correction After an Unprecedented Rise
Imbabi indicates that this decline is considered a necessary healthy correction after gold rose by more than 31% and silver by about 45% within a few weeks, which necessitated a natural rebalancing of the market before resuming the upward trend. Gold's failure to surpass the 4,380 USD per ounce level prompted markets to shift from chasing gains to protecting profits, amid a rising dollar and increased appetite for risk in global stock markets.
Driving Factors: Between Politics and Physical Demand
US President Donald Trump's announcement of an anticipated meeting with his Chinese counterpart, Xi Jinping, in South Korea, and the conciliatory tone in his recent statements, led to improved risk appetite in the markets and a return of confidence in stocks. This put pressure on precious metals, which are considered a safe haven during times of uncertainty.
Furthermore, the end of the Diwali season—one of the biggest gold-buying seasons in India, the world's second-largest consumer—contributed to a temporary decline in physical demand, exacerbating the price correction.
Long-Term Trends Remain Supportive
Despite the sharp decline, Saxo Bank believes that the structural factors that supported the rise of gold this year are still in place, including concerns about rising global government debt, a slowing US economy, and the continued expectations of interest rate cuts by the Federal Reserve.
The report added that precious metals are now not overbought but remain underrepresented in investment portfolios, which gives them long-term support and keeps the upward trend intact in the medium to long term.
Upcoming Events May Determine the Next Direction
Analysts believe that the anticipated Trump-Xi and Trump-Putin meetings in the coming weeks may constitute a crucial turning point in determining the direction of gold during the next period. Success in these meetings in calming geopolitical tensions may extend the correction period, while any escalation or failure in negotiations may quickly return investors to the safe haven.
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