Gold prices rose in both local and international markets during Tuesday’s trading session, supported by a weaker U.S. dollar following signs of a relative easing of tensions in the Middle East. However, ongoing uncertainty surrounding U.S.-Iran negotiations and expectations that interest rates will remain elevated limited the precious metal’s ability to post stronger gains, according to a report issued by the Marsad AL Dahab for Economic Studies.
The report noted that 21-karat gold gained approximately EGP 20 compared with Monday’s close, reaching EGP 6,710 per gram, while gold climbed by around $48 per ounce on international markets to trade at $4,530 per ounce, according to World Gold Council data at the time of publication.
Despite the recovery, local gold prices continue to trade roughly EGP 105 per gram above their fair value based on international pricing, reflecting continued market caution regarding future movements in the Egyptian pound against the U.S. dollar.
The report highlighted that the local market experienced a sharp decline on Monday, with 21-karat gold falling by approximately EGP 75 per gram, from EGP 6,765 to EGP 6,690. Meanwhile, international gold prices declined by about $58 per ounce, from $4,540 to $4,482.
Globally, gold managed to maintain limited gains after the recent correction, benefiting from reduced demand for the U.S. dollar as a safe-haven asset following reports of a partial de-escalation between Israel and Hezbollah, easing fears of a broader regional conflict.
U.S. President Donald Trump announced that Israel had agreed to suspend military operations targeting Beirut and its suburbs. He also indicated that indirect communications with Hezbollah had resulted in mutual commitments to avoid escalation. Nevertheless, uncertainty surrounding U.S.-Iran negotiations continues to support the dollar while weighing on gold prices.
At the same time, Iran warned that it could suspend talks with the United States following recent military developments in Lebanon. Trump, however, reaffirmed that diplomatic efforts remain underway to secure an agreement that would extend the ceasefire and restore normal navigation through the Strait of Hormuz.
Financial markets are closely monitoring these developments due to their direct impact on energy prices and global inflation trends. A normalization of oil flows and commercial shipping through the Strait of Hormuz could ease inflationary pressures and provide central banks with greater flexibility to adopt less restrictive monetary policies in the future.
However, recent U.S. economic data continue to demonstrate resilience in the American economy, reducing the likelihood of near-term interest-rate cuts. The Institute for Supply Management (ISM) Manufacturing Index rose to 54.0 in May from 52.7 in April, marking its strongest reading in four years. New orders increased and construction activity improved, reflecting sustained economic strength.
These indicators reinforce expectations that interest rates will remain higher for longer, creating challenges for gold, which does not generate yield, while increasing the attractiveness of the U.S. dollar and Treasury securities relative to the precious metal.
Investors are now awaiting upcoming U.S. labor market data, including job openings figures and Friday’s closely watched Nonfarm Payrolls report, one of the Federal Reserve’s key indicators when determining monetary policy.
According to Giovanni Staunovo, commodities analyst at UBS, U.S.-Iran negotiations currently represent the most influential factor affecting commodity markets in the near term. He emphasized that commodities continue to provide an effective hedge against inflation and energy-market disruptions.
Staunovo noted that commodities have delivered strong performance since the beginning of the year despite significant volatility, with the UBS CMCI Composite Index gaining more than 20%, supported by advances in energy and metals markets.
He also argued that a reduction in geopolitical risk premiums does not alter the fundamental drivers supporting gold, oil, and industrial metals. Rising global debt levels and persistent U.S. fiscal deficits continue to underpin investment demand for gold, while central banks maintain efforts to diversify reserves away from the U.S. dollar.
In addition, UBS expects ongoing supply shortages across several key industrial metals, including copper and aluminum, driven by the global transition toward clean energy and expanding electrification industries, supporting a constructive long-term outlook for commodity markets.
Despite this positive outlook, UBS recently lowered its year-end 2026 gold price forecast from $5,900 to $5,500 per ounce, citing continued dollar strength and elevated U.S. Treasury yields.
Bank analysts believe investors have become increasingly sensitive to opportunity costs as real interest rates remain high. Furthermore, investment inflows into gold-backed exchange-traded funds and futures markets have moderated compared with earlier in the year.
Nevertheless, UBS maintains that the long-term bullish trend for gold remains intact and expects the yellow metal to finish the year significantly above current levels, supported by central-bank purchases and continued strong global demand.
The bank also anticipates a gradual shift toward more neutral monetary policies in 2027, which could reduce support for the U.S. dollar and restore momentum to the gold market.
UBS concludes that gold remains an effective hedge against long-term economic and monetary risks, particularly amid growing global government debt, persistent inflationary pressures, and continued efforts by investors and central banks to diversify assets and reserves away from traditional currencies.
While geopolitical developments and U.S. economic data are likely to remain the dominant drivers of short-term price movements, the fundamental factors supporting gold remain firmly in place, strengthening the case for a continued upward trend in the medium and long term
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