In 2Q: Gold backs off record highs, but major buyers keep stacking

📈 The speculative phase in the gold market appears to have drawn to a close, making way for a more stable, strategic period, according to the World Gold Council’s 2Q report released in late July. The report highlights a divergence that largely defined the quarter: as gold prices pulled back from record highs, the two halves of the market reacted in opposing directions.

How it happened: Individual buyers purchasing gold for short-term speculation pulled back, whereas long-term holders seized the price dip as an entry point to buy. Central banks ramped up their net purchases once again to 289 tons — a nearly 62% y-o-y surge and a record high for a second quarter, the report noted.

Brics+ nations spearheaded this trend, viewing gold as a long-term sovereign hedge against a monetary system they no longer fully trust. Although overall 2Q demand held steady at nearly 1.27k tons, total demand value soared to an all-time high of USD 380 bn in 1H — representing 2% growth, with the London Bullion Market benchmark averaging USD 4,506/oz in 2Q.

At the retail level, shifting consumer habits were on full display. Global jewelry demand slipped to 278 tons, marking its weakest quarter since the pandemic as record prices deterred casual buyers. However, overall expenditure climbed 14% to USD 40 bn, meaning consumers received fewer grams of gold for more money — signaling that the metal maintains its share of household budgets despite lower physical volumes.

Investment products told a similar story from a different angle. Physical gold-backed ETFs saw outflows of 45 tons as institutions pulled funds amid USD strength and shifting interest rate expectations. Meanwhile, demand for bars and coins remained robust. A 2% rise in mine production offset a 6% decline in recycling — a direct reflection of price sensitivity, as lower average 2Q prices relative to 1Q reduced the incentive for individuals to sell scrap gold.

On the local level

Turning to the local market, the picture looks slightly different. Egyptian demand reached 11.1 tons in 2Q — down 4.3% y-o-y — with the scales tipping decisively toward investment over adornment for the first time. Gold bars and coins accounted for 6.2 tons, or 55.8% of total volume (up nearly 6% y-o-y), outpacing total jewelry expenditure of 4.9 tons, which dropped 14% compared to 2Q 2025.

This shift marks a fundamental change in how Egyptians preserve wealth. Appetite is moving toward bullion, which carries lower fabrication fees and maximizes hedging value — precisely the behavior expected in a market that no longer views gold merely as jewelry that might one day be resold, but as a long-term savings and investment tool.

The price trajectory was volatile yet notably orderly this time around. 21-karat gold — the most heavily traded grade among Egyptians — opened the year at record highs of EGP 7350-7650/g before undergoing a sharp correction in June to around EGP 5850, eventually hitting its true trough at EGP 5820 on 7 July.

From that point, prices rebounded on account of escalating regional tensions. The spot price sits at USD 4441/ounce, with raw 24-karat gold crossing just over the EGP 7200/gram mark, and 21-karat reaching EGP 6610 at the time of publishing. Swings of this magnitude typically trigger chaotic conditions in the Egyptian gold market, but that was notably absent this time.

Credit goes to the EGP: The primary stabilizing factor was not the precious metal itself, but the fact that official exchange rates held steady below EGP 50 per USD throughout the year. This stability compressed the domestic price premium — the markup added to local gold above global spot value during currency volatility.

For the first time in years, international spot prices dictated local valuation rather than currency fluctuations, creating a more efficient and well-supplied market, particularly for small-weight bars and coins. Meanwhile, 21-karat gold remained below EGP 6k for extended periods during the quarter.

The result? Egyptian investors can now read the gold market through the same lens as a trader in London or Dubai — using global economic and geopolitical signals — rather than hedging against currency risks first and the metal second.

What lies ahead?

The principal headwind remains US monetary policy, as elevated interest rates continue to pressure non-yielding assets like gold. The Federal Reserve could enact a 25 basis-point rate hike in December to settle rates in the 3.75-4.0% range, according to JPMorgan projections. Bank of America supports a similar outlook, anticipating a 0.75% rate increase by year-end, despite counter-projections suggesting the Fed will hold steady unless it pivots toward cuts.

These dynamics come amid criticism directed at new Fed Chair Kevin Warsh over the lack of an explicit, concrete roadmap to tackle inflation, alongside doubts raised regarding the reliance on the PCE index as the primary medium-term inflation target. JPMorgan notes that rate hikes could be pulled forward to September instead of December if CPI and inflation prints run hot — which has yet to materialize given the July inflation figures, which pointed to a modest cooling in rate pressures — whereas weaker data could afford the Fed room to remain on hold, providing greater stability, if not upward momentum, for precious metals.

Domestically, gold price stability hinges on the USD remaining below the EGP 50 mark. If that exchange rate holds, fair pricing will persist; if it breaks, currency pressures will once again take center stage. The World Gold Council report emphasizes a new reality: gold has fully transitioned from a speculative instrument into a strategic asset — and Egyptian savers, now favoring bullion over jewelry, have officially joined the trend.