Trump Rejects Iran Proposal; Gold Drops Globally and Locally Under Pressure from Dollar and Fed

Gold prices in local and global markets witnessed a significant decline during Tuesday's trading. This coincides with escalating anticipation in global markets regarding the outcomes of the Middle East conflict and the stalled de-escalation path between the United States and Iran. Markets are also awaiting monetary policy decisions from major central banks, led by the US Federal Reserve, according to a report by the "Marsad Al Dahab" for Economic Studies.

Dr. Walid Farouk, a researcher in gold and jewelry affairs and Director of the "Marsad Al Dahab," stated that the price of 21-karat gold dropped by approximately 85 EGP in the local market to reach 6,900 EGP, compared to yesterday’s closing. Meanwhile, global gold ounces fell by about $79 to reach $4,602, according to World Gold Council data.

He added the following price points for the local market:

24-Karat Gold: ~7,886 EGP

18-Karat Gold: 5,914 EGP

Gold Sovereign: 55,200 EGP

Farouk noted that the spread between buying and selling prices reached approximately 50 EGP, while the gap between the local price and the global ounce price stood at about 78 EGP.

The report clarified that the local market had recorded a decline during Monday's trading of about 15 EGP, where 21-karat gold opened at 7,000 EGP before closing at 6,985 EGP. Globally, the ounce fell from $4,710 to $4,681, a loss of $29.

Political Uncertainty and the Dollar’s Strength

The report indicated that gold fell to its lowest level in nearly three weeks, affected by the US Dollar regaining some of its momentum. This comes amid rising political ambiguity related to the stalled peace talks between Washington and Tehran, which boosted demand for the Dollar as a global reserve haven and exerted direct pressure on gold.

Diplomatic hopes dimmed after US President Donald Trump canceled a scheduled visit by his special envoy Steve Witkoff and Jared Kushner to Pakistan—a move interpreted by markets as an indicator of the failure of current political efforts.

In contrast, Iran submitted a new proposal to the United States involving:

Postponing discussions on its nuclear program until after the war ends.

Prioritizing the resolution of conflicts related to navigation in the Gulf and the Strait of Hormuz.

However, reports indicate that Trump expressed dissatisfaction with the Iranian proposal, considering it insufficient in addressing the nuclear file, which has kept geopolitical tensions high.

Economic Pressures: Oil and Interest Rates

The report suggests that continued ambiguity regarding the Strait of Hormuz, combined with the failure of political solutions, has bolstered the US Dollar as a primary reserve currency. This has pressured gold despite its traditional status as a safe haven.

Furthermore, high oil prices—stabilizing above $109 per barrel due to shipping disruptions in the Strait of Hormuz—contributed to global inflationary fears. Rising oil prices increase transportation and production costs, which may prompt central banks to keep interest rates high for longer, thereby limiting gold's attractiveness compared to yield-bearing assets.

Despite current pressures, the "Marsad Al Dahab" noted that expectations of the Federal Reserve potentially shifting to a more flexible monetary policy in the coming months might limit gold's losses. Markets are currently pricing in a 35% chance of a US interest rate cut before the end of the year, according to the CME Group's FedWatch tool.

Investors this week are focused on the results of the US Federal Reserve meeting and the statement by Chairman Jerome Powell. Markets are looking for any signals regarding the future of interest rates and the path of monetary policy, given their direct impact on gold and dollar trends.

The report concluded that some central banks might resort, in the short term, to using a limited portion of their gold reserves to support currency stability against market fluctuations. However, this does not reflect a strategic shift away from gold; the precious metal remains one of the most important defensive assets against systemic risks, currency weakness, and global policy disruptions.