Egypt's gold market experienced a significant decline in September, with prices dropping by 220 pounds, or 3.5%, according to a report by the Gold Observatory for Economic Studies. The decline was attributed to the rise in the US dollar and yields on US Treasury bonds, as well as renewed expectations of monetary policy tightening. The price of 21-carat gold, the most popular in Egypt, fell to 6,110 pounds per gram at the end of September, down from 6,330 pounds at the beginning of the month.
The global gold market also saw a decline in September, with the price of gold dropping by 297 dollars, or 6.7%, to 4,155 dollars per ounce. The decline was attributed to the strong US economy and the Federal Reserve's decision to raise interest rates. Despite the decline, the price of gold in Egypt remains 280 pounds higher than at the beginning of the year, representing a 4.8% increase.
The Gold Observatory for Economic Studies attributed the difference in the decline between the Egyptian and global gold markets to the impact of the exchange rate and the change in the difference between the local price and the value calculated based on the ounce and dollar. The observatory's director, Dr. Walid Farouk, noted that the calculation of the value of 21-carat gold using an ounce of 4,155 dollars and a dollar of 52 pounds gives a indicative price of around 6,078 pounds, compared to a local trading price of 6,110 pounds.
The Egyptian gold market is also influenced by the movement of the exchange rate, with the dollar rising by 1.07 pounds, or 2%, during September. This increase provided relative support to the price of gold in Egypt, despite the decline in the global market. Dr. Farouk noted that the transition from a discount to a premium contributed to limiting losses in the local market, and that traders' hedging against exchange rate fluctuations may have played a role in this.
Despite the decline in September, the price of gold in Egypt has maintained a significant increase since the beginning of the year. The price of 21-carat gold has risen by 280 pounds, or 4.8%, since January 1, and has increased by 510 pounds, or 9.1%, from its low in June. Globally, the price of gold has dropped by 163 dollars, or 3.8%, since the beginning of the year.
The global gold market was influenced by several factors in September, including the US Federal Reserve's decision to raise interest rates and the rise in oil prices. The Fed's decision to raise interest rates to 3.75%-4% was seen as a negative factor for gold, as it increases the cost of holding the metal. However, the price of gold also received support from the decline in US inflation data, which reduced expectations of further interest rate hikes.
Looking ahead, the gold market is expected to be influenced by a range of factors, including the movement of the exchange rate, oil prices, and interest rates. Dr. Farouk noted that the gold market's movement will depend on the path of inflation, oil prices, and the dollar, as well as the yield on US Treasury bonds. In Egypt, the movement of the exchange rate and liquidity will also play a crucial role in determining the price of gold.
Key points
- Egypt's gold market sees a 3.5% decline in September.
- Global gold prices drop 6.7% amid US economic data and interest rate expectations.
- Despite decline, Egypt's gold price up 280 pounds since start of year.
