Global gold prices witnessed a decrease after the US Federal Reserve had increased interest amid high inflation, according to Gold Bullion’s report.
The report highlighted that global gold prices fell during last week ending on Friday, by 1.6%, to close at $1810.77 per ounce, after hitting the lowest level at $1808.85 per ounce, recording a decline for the second week in a row, while it lost $117 of its value, down by 6.1%, in February.
On the other hand, the US dollar witnessed a significant appreciation in the markets, recording 5 consecutive weeks of increase, according to the dollar index, as the dollar appreciated by 1.2% during the past week.
Federal Reserve Bank’s meeting minutes on Wednesday increase negative pressure on the dollar in which, the meeting tackled the details of its last meeting in early February, which saw interest rates raised by 25 basis points to the range between 4.5% – 4.75%, that the bank continues to confront inflation until reaching the target at 2%, by means of continuous raising of interest rates.
Sharp recovery in American consumer spending in January comes amid strong growth in income and thus in spending rates, which puts positive pressure on inflation levels, and may force the Federal Reserve to change its outlook during its next meeting in March. In light of this recovery in inflation levels, gold was affected negatively due to the strong expectations of raising US interest rates and the strength of the US dollar, which is forcing gold to decline since it is a dollar-priced commodity, the report read.
Gold lost all the gains it recorded in January, and approached the level of $1,800 per ounce, which some believe might halt the downward movement somewhat, prompting a re-evaluation of the precious metal’s conditions by investors.
Additionally, US government bonds witnessed a significant rise in yields since the Federal Reserve meeting, which increased expectations of raising interest rates during the next three meetings of the bank. The yield on government bonds for 10 years, the most followed by the Federal Reserve, recorded the highest level in 15 weeks at 3.978. As for the bonds for 3 months, it recorded the highest level in 6 weeks at 4.877%, before closing the week at the level of 4.833%.
The strength of US bonds greatly supported the US dollar and negatively affected gold prices. US government bonds are able to withdraw investments from gold because they offer a return on the way to an increase compared to gold, which is a store of value and does not provide a return to buyers.
As for gold price in Egypt, the report noted that decline still dominates gold prices locally, to witness a more gradual decline, bringing the price of a gram of 21 karat, the most common, to EGP 1,680, as the local market continues to reflect the downward movement in global gold prices. Besides, the exchange rate of the pound against the dollar maintained levels of EGP 30.68 against dollar, in light of the dollar’s continued valuation in global markets after finding support from the Federal Reserve’s policy of continuing to raise interest rates.
Furthermore, this week witnessed Egypt’s return to the global debt markets for the first time since last year, by issuing Islamic sukuk with a maturity of 3 years, targeting $1.5b .Islamic bonds secured by real estate assets began to be offered at an indicative interest rate of 11.625%. With the increase in demand, the interest decreased to 11%, but the interest remains the highest offered by Egypt on debt securities, and higher than the US interest by 7%.