3 minutes read | 09/07/23 - 16/07/23

9/7-16/7: Weekly precious metals prices & returns update – precious metals rally – U.S. Inflation drops – record - breaking Inflation in Egypt.

Market Watch

Weekly Change of Local & International Gold Prices

Weekly Change of Other Key Precious Metals Prices   

Weekly Returns of Local Gold Compared to Alternative Asset Classes

Global Update

U.S. June inflation drops to 3%, signaling the end of the U.S. monetary tightening cycle. June’s inflation figure is the lowest recorded in the past 2 years.

Following an unprecedented monetary tightening cycle conducted by the Fed over the past year, U.S. inflation has witnessed consecutive slashes reaching 3% in June 2023, down from 4% during the previous month and a high of 9% in 2022.   

Last week the U.S. dollar DXY index plummeted below the 100$ mark to close the week at $99.9 down from an already low level of $102 at the beginning of the week.

The U.S. dollar has now recorded a 1 year low, down from a high of $114 in October 2022, to $99.9 in July 2023. The greenback has sustained several blows over the past period due to the swift deceleration of inflation and the gradual drop in U.S. treasury yields.  

Precious metals prices witnessed a significant increase last week with gold, silver, platinum, and palladium recording weekly growth of 1.5%, 8%, 7%, and 2% respectively.  

This substantial weekly growth in precious metals’ prices primarily comes on the back of the sluggish performance of the dollar, a decelerating U.S. inflation, and expectations of the Fed winding down its tightening cycle.

Local Update

Despite the several rate hikes conducted by the CBE, Egypt’s June inflation records a 6-year high of 35.7% up by a whopping 3% compared to the previous month.

It is noteworthy to mention that historically, the summer months in Egypt record the highest inflation figures of the year due to higher consumption rates and increased demand for goods and services. However, a rapid increase in inflation despite marked stability in the exchange rate and several interest rate hikes over the past period is alarming. The CBE targets around 7% inflation by the end of 2023, therefore we can expect major interest rate hikes over the coming period, in an attempt to put the brakes on the critically high inflation levels.   

Last week, the price of the 24k local gold increased slightly by 0.4 % to close the week at LE/g 2,485, up from the previous week’s close of LE/g 2,476.

Fluctuations in the local price of gold are instigated by changes in the global price, the exchange rate, and local supply and demand dynamics of the gold market. Although global prices have been fairly stable over the past period, the local price of the 24k gold has lost almost 20% of its value since its record-breaking high of a little over LE/g 3,000 during April and May of 2023. This drop can be attributed to the restricted liquidity in the market, resulting from the reluctance of gold holders to sell their gold, which was primarily bought during the April and May buying spree. In addition, stability in the foreign exchange market has also dampened demand for gold over the past period. Local gold is now trading at a 22% premium compared to the international spot price of gold, down from an all-time high of around 50% in April 2023.