Gold rises on lower oil prices and weaker dollar amid war negotiations and bank forecasts of price recovery

Gold prices rose in local markets and on the global exchange during Wednesday trading, supported by lower oil prices and a slight decline in the U.S. dollar. However, gains remained limited amid ongoing geopolitical tensions in the Middle East, according to a report issued by the iSagha platform.

Said Embabi, CEO of iSagha, said that gold prices in the local market rose by about EGP 70 compared to yesterday’s closing, with 21-karat gold recording EGP 6,910 per gram, while the ounce rose by about $65 to reach $4,566.

He added that 24-karat gold recorded around EGP 7,897 per gram, 18-karat gold reached about EGP 5,923 per gram, while the gold pound recorded around EGP 55,280.

Globally, gold continued its recovery on Wednesday after falling to its lowest level in four months earlier this week. The rebound came amid cautious optimism over diplomatic efforts to end the ongoing U.S.-Iran conflict, which helped ease the sharp rise in oil prices and reduce fears of immediate inflation pressures.

Gold has now recorded its second consecutive day of gains after a nine-day losing streak, one of the longest declines in recent periods.

Markets are closely monitoring developments in potential negotiations between the United States and Iran. Reports indicate proposals for a ceasefire and negotiations over Iran’s nuclear program and the reopening of the Strait of Hormuz, although conflicting statements from both sides have kept uncertainty high in global markets.

Despite the recent decline in oil prices from their peak levels, they remain higher than pre-conflict levels, which keeps inflation concerns present and limits gold’s upside. Higher energy prices typically increase inflation and interest rates, which puts pressure on gold.

On the other hand, the recent decline in oil prices has helped lower bond yields and weaken the U.S. dollar, which provided support for gold as a non-yielding asset.

Gold has fallen more than 15% since the outbreak of the war, a move that raised questions among investors about gold’s performance as a safe haven. However, analysts explained that the decline was mainly due to investors liquidating gold positions to cover losses in stock and bond markets, in addition to rising bond yields and expectations that interest rates will remain high.

Gold-backed exchange-traded funds also saw significant outflows since the beginning of the war, which added pressure on prices despite rising geopolitical risks.

Several banks and financial institutions expect gold to resume its upward trend after the current correction phase. Analysts at ING said that lower oil prices and a weaker U.S. dollar could provide additional support for gold in the coming period, but noted that in the short term the metal remains highly sensitive to currency movements, geopolitical developments, and expectations for U.S. interest rates.

Similarly, analysts at Bank of Montreal expect gold to recover a significant portion of its losses once market risk appetite returns and financial conditions stabilize, noting similarities between the current sell-off and the one that followed the 2008 financial crisis, which was followed by a strong rally in gold.

In the short term, gold is expected to remain volatile as markets continue to react to war developments, oil price movements, the direction of the U.S. dollar, and global interest rate expectations, which will remain the main drivers of gold prices in the coming period.