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The Safe Haven Turns into a Speculative Arena… Who Controls Gold?

Waleed Farouk Gold prices in local Egyptian markets rose by 5.7% during the trading week that ended on Saturday evening, while global prices rose by 3.6% during the week ending Friday, driven by escalating tensions between Iran and Israel. These developments have reignited gold's appeal as a safe-haven asset amid growing geopolitical risks and global economic uncertainty. Saeed Embabi, Executive Director of the online gold and jewelry trading platform iSagha, stated that local gold prices increased by EGP 240 per gram during the past week. The price of 21-karat gold opened the week at EGP 4,660 and closed at EGP 4,900, while the global ounce price rose by $120, from $3,310 to $3,430. He added that 24-karat gold reached EGP 5,600, 18-karat gold recorded EGP 4,200, and 14-karat stood at EGP 3,267. Meanwhile, the price of a gold pound reached EGP 39,200. Embabi emphasized that local markets experienced unjustified price surges over the weekend, even though international markets were closed. He noted that the last recorded global ounce price was $3,430, and with the official USD exchange rate at EGP 49.85, the fair value of 21-karat gold should have been around EGP 4,800 as of Saturday. However, raw gold traders pushed prices to EGP 4,900, and in some retail shops, it even reached EGP 5,000 per gram on Sunday, despite the weekend holiday. This discrepancy, according to Embabi, suggests that the local market is pricing the dollar at above EGP 51, raising questions about the pricing mechanism—especially in the absence of any logical justification or global developments that could explain such a spike. He accused some market participants of excessive hedging or even speculative greed, stressing that these behaviors may harm consumers, especially when there is no real demand to justify such surges and when 21-karat gold is being sold at EGP 5,000 per gram. 'Raising prices during market holidays without real cause shows that the local market is reacting to fear, not fundamentals,' Embabi said. He outlined two possible scenarios that could explain the gap between local and global gold prices: A sudden spike in local demand, which might have led some traders to raise prices selectively to ease supply pressures. However, Embabi dismissed this, saying: 'We haven't seen any exceptional buying activity or large-scale hoarding that would justify such a sudden rise.' Preemptive moves by major market players, possibly based on expectations of a rise in the parallel market exchange rate or in anticipation of unannounced economic decisions, prompting some to adjust prices defensively. Embabi ruled out geopolitical tensions—such as the Israel-Iran conflict—as the direct cause of the local price surge, noting that geopolitical impacts typically materialize during active global market trading sessions, not after they close, which was not the case here. He advised consumers to exercise caution and patience when making purchasing decisions: 'In this climate of uncertainty, it's better to remain calm and not rush into temporary and unjustified price waves. Waiting and buying at the right time is safer than following potentially unsustainable spikes.' Global Perspective: War Boosts Gold, Dollar Loses Shine On the global front, Embabi noted that Israel's recent military strikes contributed to stock market declines and oil price hikes, boosting gold's attractiveness as a safe haven. The yellow metal ended the week with a historic close at $3,440 per ounce, outperforming the U.S. dollar, which lost some of its luster as a safe-haven asset. He added that the noticeable shift in investor behavior confirms gold's rising status as an economic sanctuary, reflecting declining trust in traditional investment tools—particularly the U.S. dollar and Treasury bonds. U.S. economic data further reinforced this trend: CPI and PPI figures for May showed continued slowing inflation, fueling expectations that the Federal Reserve may cut interest rates in upcoming meetings. Meanwhile, consumer sentiment improved modestly, according to data from the University of Michigan. Markets are now awaiting the outcomes of the Federal Reserve's policy meeting on June 17–18, alongside key releases such as retail sales, industrial output, labor market data, and housing indicators—all of which could shape gold's trajectory in the near term. Despite easing inflation, a 6% jump in oil prices—driven by escalating Middle East tensions—has sparked concerns about a new inflationary wave, particularly in fuel prices, which could renew pressure on central banks' monetary policy stances. Bullish Forecasts Ahead Goldman Sachs reiterated its forecast that gold could reach $3,700 by the end of 2025 and $4,000 by mid-2026—a view echoed by Bank of America, which expects the same level within the next 12 months. The European Central Bank's annual report revealed that central banks' gold reserves have reached 36,000 tonnes, approaching post-Bretton Woods era highs. 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