Gold prices declined in both local and international markets during Wednesday’s trading session, pressured by a stronger U.S. dollar, rising oil prices, and growing expectations that the Federal Reserve will maintain a tighter monetary policy stance amid renewed geopolitical tensions in the Middle East, according to a report issued by Marsad Al Dahab for Economic Studies.
The report noted that the price of 21-karat gold fell by approximately EGP 45 compared with Tuesday’s close, reaching EGP 6,610 per gram. Meanwhile, gold futures declined by around $27, with the ounce trading at $4,462 at the time of writing.
The price of 24-karat gold reached EGP 7,554 per gram, while 18-karat gold traded at EGP 5,666 per gram. The gold sovereign stood at EGP 52,880. The report also indicated that local gold prices remain about EGP 104 per gram above their fair value based on international market pricing.
The local market had already witnessed a decline during Tuesday’s session, with 21-karat gold falling by EGP 35 from EGP 6,690 to EGP 6,655 per gram, while the global gold price slipped by approximately $7 during the same period.
The Truth Behind the Manufacturing Charge Increase
Marsad Al Dahab stressed that reports circulating about a new increase in gold manufacturing charges starting July 1 are inaccurate. The upcoming adjustment relates only to the value-added tax calculated on manufacturing charges and does not represent an increase in the manufacturing fees themselves, which continue to be determined by manufacturers and retailers.
The measure comes under the protocol signed between the Egyptian Tax Authority and the gold industry in 2016, which established a mechanism for collecting VAT on gold jewelry by excluding the value of the raw gold and applying the tax solely to manufacturing charges.
Under the protocol, the accounting average of manufacturing charges is increased annually by 10% at the beginning of each fiscal year, after which the 14% VAT is applied. Consequently, VAT on one gram of 21-karat gold jewelry will increase from approximately EGP 8.20 to around EGP 9.00 per gram, as the accounting manufacturing charge rises from EGP 59 to EGP 65 per gram. Likewise, VAT on 18-karat jewelry will rise from approximately EGP 12.30 to about EGP 13.50 per gram, reflecting an increase in the accounting manufacturing charge from EGP 88 to EGP 97 per gram.
Expected Impact on the Market
The report expects higher manufacturing costs to negatively affect sales activity in the coming period, particularly as the market continues to experience slower demand due to weakened purchasing power, rising living costs, and persistent inflationary pressures.
It explained that rising gold prices naturally increase production costs because the value of manufacturing losses and wastage rises alongside the value of the metal. As the price of gold increases, the cost of production losses per kilogram of gold becomes significantly higher, ultimately raising manufacturing charges.
The report added that higher jewelry costs are likely to push more consumers toward purchasing gold bars and gold coins, which carry lower manufacturing costs and are considered more suitable for savings and investment purposes.
Global Pressures Weigh on Gold
Globally, gold extended its decline on Wednesday, trading below $4,450 per ounce and reaching its lowest level in nearly a week. Rising oil prices for a third consecutive day, driven by escalating tensions in the Middle East, reignited inflation concerns and reinforced expectations that interest rates could remain elevated for longer, reducing the appeal of non-yielding assets such as gold.
Market pressures intensified after the U.S. Central Command announced defensive strikes against Iranian targets, followed by exchanges of missile and drone attacks across the region. Ongoing tensions between Israel and Hezbollah, coupled with stalled diplomatic negotiations between Washington and Tehran regarding Iran’s nuclear program and the Strait of Hormuz, have further heightened geopolitical risks.
Statements by U.S. officials regarding the continuation of sanctions on Iran, and conditions linking any sanctions relief to the abandonment of enriched uranium, have also contributed to higher oil prices and renewed concerns over global inflation.
Markets Await Key U.S. Economic Data
Investors are closely monitoring the release of the U.S. ISM Services Purchasing Managers’ Index (PMI), with expectations pointing to a slight improvement to 53.8 in May from 53.6 in April.
Markets are also assessing the outlook for U.S. monetary policy following comments from Federal Reserve officials emphasizing their commitment to bringing inflation back to the 2% target.
Current market pricing suggests a greater than 50% probability that the Federal Reserve could raise interest rates by 25 basis points at its December meeting, a development that supports both the U.S. dollar and Treasury yields while adding further pressure on gold.
India Denies Selling Gold Reserves
In a separate development, the Reserve Bank of India denied reports suggesting it had begun selling part of its gold reserves, confirming that its physical gold holdings remained unchanged at 880.52 metric tons.
Official data also showed that gold’s share of India’s foreign exchange reserves rose to 16.7% at the end of March, up from approximately 14% at the end of September.
Gold Surpasses U.S. Treasuries in Global Reserve Assets
In a historic milestone, the European Central Bank reported that gold has overtaken U.S. Treasury securities to become the largest single component of official global reserve assets, driven by the metal’s exceptional price performance over the past two years.
According to the ECB, gold accounted for approximately 27% of global reserve assets at the end of last year, up from 20% at the end of 2024. Meanwhile, the share of U.S. Treasuries declined to about 22%, compared with 25% a year earlier.
The ECB noted that central banks added 863 metric tons of gold to their reserves last year, while countries including China, Poland, Turkey, and India continued expanding their holdings as a hedge against geopolitical and economic risks.
Despite this milestone, the ECB cautioned that gold still faces certain limitations as a reserve asset compared with major currencies, including price volatility, the absence of yield, storage costs, and the limited flexibility of global gold supply.
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