U.S. Interest Rate Hikes Could Support Gold Prices in Egypt Despite Expected Global Decline

Gold prices on the global exchange declined during last week’s trading amid growing expectations of further U.S. interest rate hikes. However, the Gold Observatory believes that tighter U.S. monetary policy could support gold prices in the Egyptian market in the coming period, amid potential pressure on the exchange rate and increasing sensitivity of emerging markets to foreign capital flows, according to a report issued by the Marsad AL Dahab for Economic Studies.

Local gold prices fell by 0.2% over the past week, with 21-karat gold losing around EGP 15 after opening trading at EGP 6,845 per gram and closing at EGP 6,830.

Meanwhile, 24-karat gold recorded approximately EGP 7,806 per gram, while 18-karat gold reached EGP 5,854 per gram. The gold sovereign stood at EGP 54,640.

Globally, gold prices declined by around $31, or 0.7%, within one week, falling from $4,541 per ounce to $4,510, amid continued pressure from a stronger U.S. dollar and rising U.S. Treasury yields, alongside increasing expectations of tighter U.S. monetary policy during the second half of the year.

Global markets have become highly sensitive to any signals issued by the U.S. Federal Reserve, particularly amid persistent inflationary pressures driven by higher energy prices and ongoing geopolitical tensions in the Middle East.

Higher U.S. interest rates continue to boost the attractiveness of the dollar and U.S. debt instruments, while reducing demand for gold as a non-yielding asset, despite ongoing geopolitical tensions that continue to support safe-haven demand globally.

The report noted that the impact of U.S. monetary policy extends beyond global markets and directly affects emerging economies through accelerating outflows of short-term foreign investments, placing increasing pressure on exchange rates and foreign currency reserves.

Egypt has witnessed a notable wave of hot money outflows in recent months, estimated between $6.5 billion and $10 billion, out of total foreign investments that had previously peaked between $43 billion and $45 billion. This has significantly affected exchange rate movements and increased pressure on the Egyptian pound.

The report added that the U.S. dollar surpassing EGP 53 during May 2026 reflects the scale of pressure linked to global capital movements and shifts in U.S. monetary policy. Any additional tightening measures by the Federal Reserve could further pressure local debt instruments and treasury bills, as emerging markets seek to maintain attractive real yields for foreign investors.

 Marsad AL Dahab believes that the global decline in gold prices does not necessarily mean lower prices in the Egyptian market, as domestic gold prices mainly depend on three factors: global ounce prices, the U.S. dollar exchange rate against the Egyptian pound, and local supply and demand dynamics.

The report explained that tighter U.S. monetary policy and higher interest rates could increase pressure on foreign capital flows and debt instruments across emerging markets, making local markets more sensitive to exchange rate fluctuations.

Any rise in the dollar exchange rate directly impacts local gold prices, as a one-pound increase in the dollar may raise gold prices by approximately EGP 100 to EGP 120 per gram, depending on global prices and market conditions. This could support local gold prices despite the decline in global ounce prices.

Although optimism increased last week regarding the possibility of a diplomatic agreement between Washington and Tehran following a series of meetings, markets remained primarily focused on the future path of U.S. monetary policy as the main driver of gold prices during the current phase.

Markets are awaiting the release of U.S. GDP data and the Personal Consumption Expenditures (PCE) Index next week, the Federal Reserve’s preferred inflation gauge, in addition to statements from Federal Reserve officials, as investors attempt to assess the future direction of interest rates.

The report indicated that continued inflationary pressures or stronger-than-expected economic data could push the Federal Reserve toward even tighter monetary policy, keeping gold under pressure globally in the short term, while local prices may continue to receive relative support from exchange rate movements.

Amid these pressures, the Egyptian market faces an additional challenge represented by rising manufacturing costs for gold jewelry. The Gold Observatory revealed that manufacturers are preparing to increase fabrication charges starting next June due to higher production, energy, and raw material costs, despite the relative slowdown in the market and weak consumer purchasing power.

Expected increases are estimated at around EGP 30 for 21-karat jewelry and EGP 60 for 18-karat jewelry, a move facing broad rejection from the retail sector amid declining sales and weakened consumer ability to absorb additional price increases.

Data from the World Gold Council confirms the decline in demand, as gold jewelry purchases in Egypt fell by 19% during the first quarter of 2026, reaching 5.2 tonnes compared with the same period last year, reflecting the mounting pressures facing the domestic market.

 Marsad AL Dahab believes that the Egyptian gold market will remain more closely tied to exchange rate movements and foreign capital flows than to global ounce prices in the coming period, amid the continued sensitivity of emerging markets to U.S. Federal Reserve decisions.