The US dollar is no longer the dominant factor in gold pricing in Egypt after exchange-rate stability, alongside the disappearance of the parallel foreign exchange market, significantly reduced its influence on the local bullion market, according to gold and banking experts.
While the dollar remains one of the components used to price gold domestically, its impact has diminished markedly from the peak of Egypt's foreign currency crisis, when exchange-rate volatility fuelled exceptional increases in local gold prices.
Instead, movements in international gold prices, US Federal Reserve monetary policy, and geopolitical developments have reclaimed their position as the primary drivers of the market.
The shift is reflected in recent market performance. A Gold Billion analysis indicated that 21-karat gold, the most traded in Egypt, lost around EGP 1,045 during June, a decline of 15.5 percent and the largest monthly drop in years. The fall coincided with the global gold price slipping below $4,000 per ounce and the dollar easing to around EGP 49.20 against the Egyptian pound.
The decline has also come amid improving macroeconomic indicators. The International Monetary Fund (IMF) recently reached a staff-level agreement with Egypt on the fifth and sixth reviews of its economic reform programme, reiterating that exchange-rate flexibility remains the country's "first line of defence" against external shocks.
Data from the Central Bank of Egypt (CBE), cited in the IMF report, also showed that net international reserves rose to $53.134 billion at the end of May 2026, reflecting stronger foreign currency liquidity and supporting exchange-rate stability, thereby reducing the impact of currency fluctuations on the domestic market.
Experts told Ahram Online that the developments indicate that Egypt's gold market is becoming increasingly aligned with international trends after years in which exchange-rate swings largely dictated local prices.
Three factors now determine gold prices
Economic and banking expert Walid Adel told Ahram Online that Egypt's foreign exchange market is currently experiencing relative, not absolute, stability, noting that it is considerably more balanced than it was two years ago following the unification of the exchange rate, the return of foreign currency transactions to official banking channels, and the sharp contraction of the parallel market.
He attributed the improvement to a better balance between dollar supply and demand, supported by stronger foreign inflows, rising remittances from Egyptians working abroad, the continued recovery of tourism, and the Central Bank's more flexible exchange-rate management policy, which has strengthened investor confidence.
Adel stressed that while Egypt's foreign currency shortage has become more manageable, it has not been completely resolved. Sustaining exchange-rate stability, he said, depends on maintaining robust foreign currency resources, particularly in light of external debt obligations, import requirements, and the vulnerability of emerging markets to global developments.
He explained that gold prices in Egypt are now determined by three main factors: the international gold price, the exchange rate between the dollar and the Egyptian pound, and domestic supply and demand.
According to Adel, the recent decline in gold prices resulted from lower global bullion prices, combined with a stable domestic exchange rate, which eliminated the speculative waves that had previously driven prices higher during periods of exchange-rate turbulence. As a result, the Egyptian market has become more closely linked to movements in global gold prices than in previous years.
He expected the relative stability of Egypt's foreign exchange market to continue throughout the second half of the year, provided foreign currency inflows remain at current levels. However, he warned that external shocks, including heightened geopolitical tensions, changes in US monetary policy, or capital outflows from emerging markets, could alter that outlook.
Fed policy remains the biggest influence
Said Embaby, chief executive of the iSagha platform, stated that the decline in domestic gold prices was driven by easing geopolitical tensions, lower international gold prices, and the appreciation of the Egyptian pound against the dollar.
He noted that the local market is now moving almost entirely in line with global trends, adding that the strength of the US dollar internationally, together with expectations that the Federal Reserve will maintain a restrictive monetary policy, currently represents the single most influential factor affecting gold prices.
Embaby said the dollar's decline against the pound, from around EGP 54 to nearly EGP 49.2, contributed significantly to the drop in local gold prices, with 21-karat gold retreating from nearly EGP 5,500 per gram alongside the decline in the international gold price. He added that the stronger pound has reduced price volatility in the domestic market.
He said investors are closely watching upcoming Federal Reserve decisions. A move toward interest rate cuts would likely help gold regain momentum globally and lift domestic prices, while keeping interest rates high, or raising them further, would continue to weigh on the precious metal.
Embaby expects gold to resume its upward trend over the medium term, anticipating that the Fed will eventually begin cutting interest rates, supporting a recovery in global bullion prices.
He also noted that buying and selling activity in the local market has slowed as many consumers wait for further price declines, resulting in weak trading over the past two months. Demand, however, remains strongest for gold bars and coins, which carry lower manufacturing costs than jewellery and are therefore viewed as the preferred investment option.
He added that the narrow gap between local prices and gold's fair value reflects a calmer market and a relative balance between supply and demand, with Egyptian prices now closely tracking international bullion markets in the absence of exceptional domestic pressures.
Gold could rebound in the fourth quarter
Hany Milad, head of the General Division of Gold and Jewellery at the Federation of Egyptian Chambers of Commerce, said the local market remains closely linked to global developments, explaining that gold prices in Egypt are primarily determined by the international ounce price, which is denominated in US dollars, and then converted using the official exchange rate announced by the Central Bank of Egypt.
He attributed the recent decline in gold prices mainly to the shift in US monetary policy from easing to tightening, which strengthened the dollar globally and pressured bullion prices, while the easing of geopolitical risks also reduced demand for gold as a safe-haven asset.
Milad stressed that the relationship between gold and the dollar remains intact because international gold prices are denominated in US currency. He added that the decline in the dollar's exchange rate at local banks, from above EGP 50 to around EGP 49.2, also contributed to lower domestic gold prices.
He rejected suggestions that the market experienced organized speculation during the foreign currency crisis, saying the surge in trading activity was instead driven by rapid price fluctuations and market instability rather than coordinated speculative activity.
Milad expects gold prices to resume their upward trajectory during the final quarter of 2026, noting that the global ounce is currently trading near $4,000, which he considers a strong support level. Unless economic or geopolitical developments alter market direction, he believes prices are likely to rise again.
He added that geopolitical developments and future Federal Reserve interest rate decisions will remain the key factors shaping global and domestic gold prices in the coming months.
'Hot money' key to pound's performance
Banking expert Tarek Metwally, former deputy chairman of BLOM Bank, told Ahram Online that indicators such as the availability of dollars within the banking system and the disappearance of the parallel market demonstrate that Egypt's foreign exchange market is functioning in a more orderly manner.
He added that exchange-rate movements in either direction do not contradict market stability but rather reflect the dynamics of supply and demand within a flexible exchange-rate system.
Metwally said the Egyptian pound endured one of its most challenging periods during the escalation of geopolitical tensions in the region, when foreign investors withdrew part of their holdings in Egyptian debt instruments. However, the currency has since recovered some of its strength as tensions eased and foreign portfolio inflows, commonly referred to as "hot money," returned, contributing to the dollar's decline against the pound.
He said maintaining exchange-rate stability will depend on continued foreign currency inflows, geopolitical developments, and short-term foreign investment movements, all of which remain among the most influential factors affecting the pound.
Turning to gold, Metwally said the record highs reached by the precious metal during periods of heightened geopolitical tensions, particularly following the outbreak of the US-Iran conflict, were driven by increased demand for safe-haven assets, higher gold purchases by central banks worldwide, and speculative activity fuelled by market uncertainty.
He described the price declines recorded over the past two months as a natural correction following those record gains, reflecting easing geopolitical tensions and improving market stability. Gold, he added, typically moves through cycles of rallies followed by price corrections.
Metwally concluded that gold remains a long-term store of value rather than a vehicle for quick profits, advising investors to diversify their portfolios instead of concentrating all their savings in a single asset.
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