Books: Mahmoud Haha – Economy Gate
The global gold markets witnessed an exciting week in the march of the precious metal, in which the decline dominated commodity prices in general, after the US dollar returned to control the course of affairs with the support of the Federal Reserve Bank and strong inflation data, according to the Gold Billion report. Global gold prices fell during the week ending today Yesterday, Friday, by 1.6%, to close at the level of $1810.77 an ounce, after hitting the lowest level at $1808.85 an ounce, recording a decline for the second week in a row, while at the level of February to this day, gold lost $117 of its value, down by 6.1%.
On the other hand, the US dollar witnessed a significant rise in the markets, recording 5 consecutive weeks of rise, according to the dollar index, which measures the performance of the federal currency against a basket of 6 major currencies, as the dollar index rose during the past week by 1.2%.
Fed meeting minutes increase negative pressure on the dollar
The Federal Reserve indicated in the minutes of its meeting last Wednesday, which discusses 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 Continue to raise interest rates.
Some of the Bank’s members demanded an interest rate hike of 50 basis points, but the majority of the Bank’s members agreed to reduce the rate of interest increase in order to confirm the results of the violent hike operations that began since last year, in addition to giving an opportunity for economic data to express the status of inflation and the real economy.
The economic data holds an unpleasant surprise for gold
A number of economic data were released from the United States of America during the past week, the most prominent of which was the growth data for the US economy during the fourth quarter of last year, as the gross domestic product index witnessed a growth of 2.7%, less than the initial estimate of 2.9%.
While the personal consumption expenditures index during the fourth quarter increased by 3.7%, higher than the previous estimate of 3.2%.
As for the personal consumption expenditures index for January, which is the Fed’s favorite measure of inflation, it increased by 0.6% from a previous increase of 0.2% in December, and the annual index, which measures inflation in the 12 months to January 2023, increased by 5.4% from 5.3%.
The sharp recovery in 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.
Gold lost all the gains it recorded during the month of January, and approached the level of $1,800 an ounce, which some believe might halt the downward movement somewhat, prompting a re-evaluation of the precious metal’s conditions by investors.
US government bonds add to the suffering of gold
US government bonds witnessed a significant rise in yields since the minutes of 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.
The ratio of gold to silver portends the sale of gold
The gold-to-silver ratio is the amount of silver needed to buy an ounce of gold. It is a historical ratio that is used by many investors and gold traders as an indicator to determine the best time to buy and sell. If the ratio of gold to silver is high, then this means that this is the right time to buy silver and thus sell gold because the ratio is more suitable for silver.
The technical analysis of Bellion Skins shows an increase in the ratio of gold to silver since the beginning of 2023. It also shows that the ratio is close to reaching a resistance area that may push the ratio down during the coming period, which reflects the increasing factors that encourage a decline in gold prices during the coming period.
Gold investment funds are at their lowest levels
The following chart is for the investment fund SPDR Gold Trust GLD, which is the largest investment fund in gold with assets amounting to $ 54.13 billion in the past year.
The graph shows that the fund’s performance declined starting from February, to enter a downward trend that reached its lowest level since the end of last December, which reflects the impact of investment funds on the current approach of the Federal Reserve Bank.
The current decline in global investment funds on gold reflects an exit of capital from investing in gold in favor of government bonds and dollar-backed debt instruments, which has returned to be the best investment in the market today, in light of the US Federal Reserve’s adherence to reaching the inflation target by raising interest rates.
Gold price in Egypt
The decline still dominates gold prices locally, to witness a more gradual decline, bringing the price of a gram of 21 carat gold, the most common, to 1680 pounds, as the local market continues to reflect the downward movement in global gold prices.
The exchange rate of the pound against the dollar maintained levels of 30.68 pounds per dollar, in light of the dollar’s continued rise in global markets after finding support from the Federal Reserve’s policy of continuing to raise interest rates.
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 $1.5 billion. .
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%.
The reason behind the high interest on sovereign Islamic sukuk to this level is the decline in Egypt’s credit rating by Moody’s to B3 with the stability of the future outlook, in addition to the rating of the sukuk program established by Egypt by $ 5 billion at B3, which raises the risk for investors and thus demands a high interest rate. to attract investors.
