Marsad al-Dhahab: Gold Trims Gains Following a Strong Surge Driven by Middle East Truce

Gold prices in local markets and the global stock exchange trimmed a portion of their gains during Wednesday's trading, after the ounce touched its highest levels in nearly three weeks, initially supported by the decline of the US dollar and increasing hopes of ending the war in the Middle East, according to a report by the "Marsad al-Dhahab" for Economic Studies.

 Dr. Walid Farouk, a researcher in gold and jewelry affairs and director of the "Marsad al-Dhahab," said that gold prices in the local market trimmed their gains by about 50 EGP from the highs recorded at the beginning of trading, with the 21-karat gold gram recording 7,200 EGP after touching 7,250 EGP.

 He added that the ounce on the global exchange rose by about $76 to record $4,783, after touching the level of $4,840. He also noted that the price of 24-karat gold recorded about 8,229 EGP, and 18-karat gold recorded 6,171 EGP, while the price of the gold sovereign reached about 57,600 EGP.

 Regarding silver, the price of a silver gram rose by about 3 EGP, with 999-karat recording about 135 EGP, 925-karat about 125 EGP, and 800-karat about 108 EGP, while the silver coin recorded about 1,000 EGP, and the global ounce rose from $72 to $77.

Gold prices rose by about 2% during today's trading, supported by the announcement of a ceasefire in the Middle East, surpassing the level of $4,800 per ounce, while silver prices exceeded $77, achieving gains of nearly 6%. 

This rise was supported by the decline of the US dollar and improved market sentiment as immediate fears of military escalation receded, which boosted the appetite for precious metals. 

Estimates suggest that expectations of lower oil prices, along with the potential reopening of the Strait of Hormuz, may contribute to easing inflationary pressures, thereby reducing the chances of tightening monetary policy, while the weakness of the dollar continues to support investment flows into gold and silver.

 Nevertheless, the future of prices remains dependent on the sustainability of the current truce and the recovery of navigation in the Strait of Hormuz, especially in light of the ongoing complexities of the negotiating scene and Iran's adherence to its main demands.

In the same context, the temporary truce between the United States and Iran bolstered investor confidence, pushing the dollar index to its lowest levels in nearly a month, which provided additional support for gold. 

Institutional demand also remains a key factor in supporting prices, with continued purchases by central banks, led by the People's Bank of China, which continued to increase its reserves for the seventeenth consecutive month. 

The United States had announced the suspension of military strikes for two weeks, coinciding with Iran's acceptance to secure navigation in the Strait of Hormuz and the start of negotiations in Islamabad, while emphasizing that this step does not mean the end of the war, which keeps uncertainty persistent in the markets.

 The Director of the Gold Observatory said that current geopolitical developments, primarily the war in Iran, along with the notable expansion in defense spending in Europe and the United States, indicate the preparation of an environment supportive of rising gold prices in the medium term, with the level of $6,000 per ounce remaining a potential target.

Despite the decline witnessed by the yellow metal since the outbreak of the conflict, this performance reflects its traditional role as a safe haven and a highly liquid asset in times of crisis, for both countries and investors.

 In this context, some countries, such as Turkey and the Gulf states, have resorted to liquidating part of their gold reserves to cover expenses, especially in the event of energy export disruptions, which highlights gold's flexibility as an asset that can be quickly converted into liquidity. 

The nature of gold as an asset not linked to the obligations of any party also enhances its attractiveness compared to sovereign debt instruments, which essentially represent lending to governments—a point of increasing importance amid rising global debt and fiscal deficit levels.

 This coincides with deeper shifts in the global monetary system, where there is a growing trend toward reducing reliance on the dollar as a reserve currency, driven by mounting concerns over the risks of holding assets denominated in it, especially after the repercussions of freezing Russian assets following the war in Ukraine.

In light of these variables, expectations emerge for a gradual reshaping of the global financial system, which may prompt surplus countries to reduce their investments in US bonds, thereby strengthening gold's position as a strategic alternative in reserves. 

The report explained that despite the short-term fluctuations that pushed prices down recently, the stabilization of geopolitical conditions may prompt gold to resume its upward path and exceed the level of $6,000 per ounce in the coming period.

 The Director of the Marsad al-Dhahab believes that gold is still fundamentally supported by strong central bank purchases and global uncertainty. According to recently released data, BRICS+ countries continue to strengthen their position in the global gold market, as they currently possess more than 6,000 tons, representing about 17.4% of total central bank reserves, compared to 11.2% in 2019, with clear dominance from Russia and China, which together hold about 74% of the bloc's total reserves, followed by India. This expansion reflects strong and growing sovereign demand for gold as a strategic asset, within a global trend to redistribute reserves away from the dollar, which supports price stability and reinforces the bullish outlook for the precious metal in the medium and long term. In a related context, markets are now awaiting the minutes of the Federal Reserve's March meeting later today to determine the fate of interest rates in the coming period.