The decline in the price of gold globally due to the decline in fears of the US debt crisis

The decline in the price of gold globally due to the decline in fears of the US debt crisis
The decline in the price of gold globally due to the decline in fears of the US debt crisis

Gold extended its losses for the third day in a row, to record its lowest level in four weeks, in light of the continued recovery of the US dollar and the growing expectations of the Federal Reserve for more monetary tightening, and on the other hand, fears of the US debt crisis receded, according to Gold Billion.

Spot gold prices are trading today, Thursday, at the time of writing the technical report of Gold Billion, at the level of $1976 an ounce, down by 0.3%, recording the lowest level in four weeks at $1972 an ounce, to drop gold since the beginning of the week by 1.6%.

Since gold recorded its highest historical level at the beginning of this month at $2080 an ounce, it has lost more than $100, down by 5% in less than two weeks, as this negative movement remains within the negative correction range on gold levels after recording record levels.

The direct reason for pushing gold prices to decline this week is the return of the US dollar to the recovery in the financial markets, which caused gold to become cheaper for holders of other currencies since gold is a dollar pricing commodity, as well as the fading of fears of the US debt crisis.

The dollar index, which measures its performance against a basket of 6 major currencies, rose today by 0.2% and reached its highest level in nearly two months at the level of 102.99, thus recording an increase for the third day in a row, to rise on the weekly level by 0.4%.

The dollar found this great support from the continuous statements of the Federal Reserve members this week, which indicated, in their entirety, the continuation of inflation fears and the need for continued monetary tightening by the Federal Reserve in return, which may include a return to raising interest rates after the bank indicated in its last meeting the possibility of fixing interest. at the next June meeting.

Chicago Fed President Austin Goolsby said on Tuesday it was too early to talk about interest rate cuts, while Cleveland Fed President Loretta Mester said rates had not yet reached a certain point where they could remain flat.

Meanwhile, markets are pricing in a 76.2% chance that the Fed will hold interest rates at current levels in June, and market participants also backtracked on their expectations for a rate cut this year.

All of these factors helped to support the dollar and in turn pushed gold prices to decline, as the expectations of raising interest rates are bad news for gold, which is an asset that does not provide a return to its holders, unlike government bonds that generate a return to its holders with high interest rates.

The yield on 10-year US bonds increased since the beginning of the week by 3.8%, to reach the highest level in two weeks at 3.597%, while the yield on two-year bonds, which is more sensitive to interest rate changes, increased since the beginning of the week by 4.4% and recorded the highest level in 3 weeks at 4.173%.

Gold lost this week its last support during this period, which is concerns about the US debt crisis and the US government’s failure to pay its obligations, after the fears in the markets diminished this week after encouraging statements by US decision-makers.

US President Joe Biden said yesterday that he is confident of reaching an agreement on the US debt crisis, and indicated that all leaders agree not to default and discussions will continue until an agreement is reached on the issue of the US debt ceiling.

Market sentiment improved after the Biden administration gave positive signals about raising the US debt ceiling, indicating that a deal could be reached with Republican lawmakers by this week.

Concerns about a possible US debt default have been a major source of concern for the markets in light of the dispute between the Republican and Democratic parties over the terms of the budget, and these concerns have been the main source of support for gold during the recent period.

However, as these fears dissipated, gold lost any support and rushed to decline while the US dollar gained enough positive momentum to make more gains.

Gold price in Egypt

The series of decline in local gold prices continues, as the markets witness an acceleration of decline, supported by the decline in global ounce prices and its stability below the psychological level of $2000 for the third day in a row, while the decline in the exchange rate of the pound against the dollar in the parallel market contributes to confirming this decline.

The most popular 21 carat gold price recorded today, Thursday, 2210 pounds per gram, with the gradual decline in prices continuing since the beginning of the week, while the gold pound recorded today 17680 pounds.

Gold prices have declined since recording a historical high of 2800 pounds per gram by 590 pounds, down by 21% during a record period, which confirmed the view of some that the record levels previously recorded by gold were exaggerated and did not reflect the real price of gold.

Since the beginning of the week, gold has decreased by 200 pounds per gram, a decrease of 8.3%. This corresponds to a significant and noticeable decline in global gold prices since the beginning of the week by $30.

The gradual return of confidence in the Egyptian markets helped to continue the decline in gold prices, especially at a time when the exchange rate of the pound against the dollar was declining in the parallel markets, which helped bring gold pricing locally closer to the global price.

Also, the initiative to allow gold imports to enter without customs or fees contributed to increasing the local supply of gold to meet the increasing demand during the recent period, in addition to the official announcement of the work of the first investment fund in gold, which contributed to the calm and control of the gold markets.

We may witness a return to increased demand for gold during the coming period, as many may resort to buying gold at current levels that are encouraging to buy, which is what restores demand to increase, but the recent stability in the local gold market will achieve a balance between supply and demand, and even if prices return to rise, it will be within acceptable moves.

Finance Minister Mohamed Maait stated that Egypt was able to pay international bonds during the first quarter of this year at a value of $3.5 billion, and indicated that he expected tourism revenues to rise by the end of the fiscal year 2022-2023 to $14 billion.

The Minister of Finance also indicated that by the end of 2023, the country will witness stability in the exchange rate and the beginning of control over inflation rates, and he emphasized the Prime Minister’s recent statements that Egypt has not and will not fail to pay its international dues, in response to numerous international reports that questioned Egypt’s ability to fulfill its obligations. .