Will gold prices rebound after its decline in Egypt?

Egyptian gold prices experienced a decline on Tuesday, impacted by US inflation figures that surpassed forecasts. A gram of 21-karat gold dropped to roughly LE 6,180, down from LE 6,250. Lotfi al-Moneeb, Vice Chairman of the Gold and Jewelry Division at the Federation of Egyptian Chambers of Commerce (FEDCOC), stated that the US inflation data has heightened the probability of the Federal Reserve maintaining or raising interest rates.

This development strengthens the US dollar and bond yields, putting downward pressure on gold globally. Due to these expectations, global gold prices fell by approximately three percent, nearing the US$ 4,000-per-ounce level. In Egypt, the domestic market's decline in gold prices has been compounded by an improved exchange rate for the Egyptian pound against the US dollar, with the dollar falling from over LE56 in late October to approximately LE 53.4 currently.

Al-Moneeb explained that the outlook for late 2026 into 2027 is likely to see continued price volatility due to the fluctuating global geopolitical tensions. Demand for gold jewelry has waned due to higher prices and reduced purchasing power stemming from the pound's depreciation versus the dollar, while gold bars and gold coins remain appealing for those seeking to save.

However, the market is not witnessing a complete halt in buying; instead, consumers are adjusting their behavior, with some purchasing during price dips and others waiting for greater stability. Some are even opting to sell due to the need for liquidity and to cover living costs due to rising prices. iSagha CEO Said Imbaby noted that US inflation exceeding expectations puts short-term pressure on gold and silver, as it reduces the likelihood of the Federal Reserve cutting interest rates and increases the chance of a hawkish monetary policy persisting or rates being raised.

Such a scenario could bolster the US dollar and bond yields, diminishing the appeal of gold and silver. Imbaby emphasized the importance of differentiating between short-term impacts and long-term fundamentals, highlighting that gold remains attractive due to central banks' purchases, concerns about debt, and geopolitical tensions.

In the Egyptian market, price projections for 2027 vary, ranging from approximately $4,250 to $4,650 per ounce. However, the local market is influenced by factors beyond the global price per ounce, including the dollar-to-Egyptian-pound exchange rate and supply and demand dynamics. Thus, predictions for local prices in Egyptian pounds should be based on clear assumptions regarding the exchange rate.

Albaby observed a shift in consumer behavior in the Egyptian market, with a segment of buyers moving toward investing in gold bars and coins, which incur lower making charges and are easier to resell compared to gold jewelry. This shift is evident in the growth of investment demand for gold during the third quarter of 2026, despite a decline in jewelry demand.

Albaby advised approaching the current phase with caution, recommending staggered purchases over time and avoiding decisions based on a single day's market movement or an isolated economic report. He explained that market trends are shaped by various economic and financial factors, including US interest rates, the dollar's performance, inflation, investment and industrial demand, and geopolitical tensions.