Iranian Breakthrough Pushes Gold Higher While Pressuring the Dollar and Oil

Gold prices rose in local markets and on the global exchange during Monday’s trading, supported by a weaker U.S. dollar and declining global oil prices, amid signs of progress in negotiations between the United States and Iran, which boosted expectations of easing global inflationary pressures, according to a report issued by the Marsad Al Dahab for Economic Studies.

The report stated that local gold prices increased by around EGP 50 compared to the close of last week’s trading, with 21-karat gold reaching EGP 6,880 per gram, while the global ounce climbed by approximately $65 to $4,575, according to data from the World Gold Council.

It added that 24-karat gold recorded around EGP 7,863 per gram, while 18-karat gold reached EGP 5,897 per gram, and the gold pound coin recorded about EGP 55,040.

The report explained that local gold prices had declined by 0.2% during the previous week, after 21-karat gold lost around EGP 15, falling from EGP 6,845 to EGP 6,830. Meanwhile, the global ounce dropped by around $31, or 0.7%, over the course of one week, declining from $4,541 to $4,510.

The Marsad Al Dahab noted that global markets witnessed a clear shift in investor appetite toward gold as concerns over rising global inflation eased following a more than 6% drop in oil prices at the start of the week. Oil reached its lowest levels in three weeks amid growing expectations of reopening the Strait of Hormuz and the resumption of normal oil flows from the Gulf region.

These developments also pressured the U.S. dollar, with the U.S. Dollar Index falling by around 0.4% after retreating from its highest levels in six weeks, which increased the attractiveness of gold for investors, especially as expectations for prolonged inflation driven by higher energy prices declined.

According to the report, the United States and Iran are nearing a final agreement framework that includes extending the ceasefire for 60 days, reopening the Strait of Hormuz, and allowing Iran to sell oil under specific exemptions, despite ongoing disagreements related to supervision of the strait, highly enriched uranium, and frozen Iranian assets. U.S. reports also indicated that securing final approvals could take several more days.

On the other hand, gold markets continue to face pressure linked to expectations surrounding U.S. monetary policy, as market bets on a U.S. interest rate hike in December continue to increase after the energy crisis and higher oil prices over recent months fueled persistent inflationary pressures.

Data from the CME Group FedWatch Tool showed that markets are currently pricing in a 52% probability of a rate hike in December, compared to only about 16% at the beginning of May.

The report emphasized that rising U.S. Treasury yields remain a key pressure factor on gold in the short term, as they reduce the appeal of the precious metal in favor of higher-yielding debt instruments, especially with the Federal Reserve maintaining its higher-for-longer interest rate stance.

It added that investors are closely watching upcoming U.S. inflation data, particularly the Personal Consumption Expenditures (PCE) Index, which is considered the most influential indicator for Federal Reserve policy direction and global gold price movements.

The Marsad Al Dahab believes that gold still retains strong long-term support factors, most notably continued central bank purchases and rising concerns related to liquidity and global inflation. However, short-term movements are expected to remain dependent on developments in U.S. Treasury yields, the strength of the dollar, and the trajectory of U.S. monetary policy.