Sharp Decline in Gold Prices Due to Dollar Strength and Profit-Taking

Gold prices in local and global markets registered sharp declines during Tuesday's trading, affected by the rise of the US Dollar and profit-taking operations, amidst cautious optimism about progress in trade negotiations between the United States and China, according to a report issued by "I-Sagha" platform, specialized in gold and jewelry trading.

Saeed Embaby, the platform's Executive Director, stated that gold prices dropped by approximately EGP 155 during today's trading, bringing the price of 21-carat gold per gram to EGP 5,720, while the ounce fell by about $131 to record $4,217.

The 24-carat gold recorded EGP 6,537, 18-carat EGP 4,903, and 14-carat approximately EGP 3,814, while the price of the gold pound stabilized at EGP 45,760.

Local gold prices had risen by about EGP 125 during last week's trading, where the 21-carat gold gram opened at EGP 5,750, touched EGP 5,900, and closed trading at EGP 5,875. Globally, the ounce rose by about $103, from $4,245, touched $4,380, before closing at $4,348 per ounce.

Gold fell by more than 2% after retesting its historical levels near $4,380 per ounce, affected by the rise of the US Dollar index and improved risk appetite among investors.

Experts believe that market optimism regarding potential progress in trade negotiations between Washington and Beijing has reduced demand for safe havens, especially with news indicating the possibility of avoiding the full tariffs that US President Donald Trump threatened to implement starting early November.

Analysts said that the strong rebound of the US Dollar – whose index rose to 98.84 points, recording its highest level in a week – contributed to pressure on gold, while traders preferred to take partial profits after the excessive rise in previous sessions.

Gold price fell on Tuesday after retesting its record highs near $4,380 USD on Monday. This decline comes as the US Dollar continues its recovery gains, and traders engage in partial profit-taking after an excessive rally.

Improved risk appetite is weighing on bullion, as investors show cautious optimism amid hopes of de-escalation in US-China trade tensions. Increasingly positive headlines have fueled expectations that the full tariffs threatened by US President Donald Trump on all Chinese imports starting from November 1st might be avoided.

This reduction in tension has contributed to the rise in high-risk asset prices and recently bolstered the US Dollar. Nevertheless, uncertainty remains, given Trump's unpredictable rhetoric and the fragility of the ongoing negotiations.

However, the general outlook for gold remains positive despite the decline. Expectations of a dovish monetary policy shift by the Federal Reserve continue to enhance the yellow metal's appeal, as lower interest rates reduce the opportunity cost of holding non-yielding assets. Meanwhile, the ongoing US government shutdown and continuous geopolitical and economic risks help maintain safe-haven flows.

President Donald Trump expressed cautious optimism on Monday, announcing his expectation to reach a "fair and excellent trade deal" with China after the APEC summit meetings in South Korea later this month. However, he warned that a 155% tariff might take effect on November 1st if no deal is reached.

In a related context, the United States and Australia signed an $8.5 billion agreement to develop essential minerals supply chains and reduce reliance on China, a move that is part of Washington's strategy to curb Chinese dominance over rare-earth minerals.

The US government shutdown entered its fourth week on Monday with no clear end in sight, forcing many key agencies to furlough employees temporarily. Nevertheless, White House Senior Advisor Kevin Hassett told CNBC that he expects the shutdown to end "sometime this week."

Markets are awaiting the release of the US Consumer Price Index (CPI) next Friday, after it was postponed due to the government shutdown entering its fourth week. The index results are expected to influence the Federal Reserve's decisions during its meeting on October 29 and 30, as the CME FedWatch Tool forecasts indicate markets are pricing in a new 25 basis point rate cut with a 98.9% probability.

Analysts believe that the Fed's accommodative monetary policy, along with the government shutdown and continuous geopolitical risks, keep the medium-term outlook for gold positive, despite the current declines.

Embaby affirmed that the current decline is a natural correction after a record upward wave, pointing out that the continued weakness of some global currencies and the rise in investment demand could soon return gold to an upward trajectory. He said: "The market is witnessing sharp volatility, but the general trend still leans towards rising, especially with the persistent factors supporting the precious metal, including global inflation, political tensions, and monetary policy uncertainty."