The announcement of a renewed ceasefire agreement between Israel and Lebanon, brokered after US-led talks in Washington, has triggered notable movements across currency and precious metals markets. The ceasefire, contingent on a 'complete cessation' of fire by Iran-backed Hezbollah and the evacuation of its operatives from southern Lebanon, led to a pullback in the US Dollar (USD) as risk aversion eased, causing the Swiss Franc (USD/CHF) to halt its three-day winning streak and trade around 0.7910 during Asian hours on Thursday [1][2]. Gold (XAU/USD) rebounded to the $4,475 area, reversing much of the previous day's decline to a one-week low, as the truce prompted profit-taking in the USD and supported the commodity [2]. Silver (XAG/USD) also climbed 1.2% to near $73.60, recovering from a sharp sell-off, though it remains technically fragile amid ongoing concerns about a prolonged US blockade on Iranian sea ports [3].
Despite the ceasefire, geopolitical risks persist due to the lack of progress in US-Iran diplomatic negotiations and renewed hostilities in the Middle East, which continue to limit USD losses and cap further gains in gold and silver prices [2][3]. The Republican-led US House of Representatives approved a resolution to block President Donald Trump from taking further military action in Iran, raising hopes for a deal to end the three-month-old US-Israeli war with Iran, but diplomatic engagement remains stalled as Tehran demands the immediate unfreezing of capital, a condition the US has rejected without significant Iranian concessions [2].
Market expectations for US monetary policy have shifted, with stronger-than-expected US jobs data—including the May ADP private payrolls and JOLTS job openings—suggesting a resilient labor market and prompting traders to anticipate that the Federal Reserve (Fed) will keep interest rates higher for longer [1][3]. The CME FedWatch Tool now prices in a nearly 42% probability of a Fed rate hike in December [1]. Elevated oil prices, driven by ongoing conflict in Iran, are fueling inflation and reinforcing this hawkish outlook, which generally weighs on non-yielding assets like gold and silver [1][2][3].
Technically, gold remains below the $4,500 psychological mark and faces resistance at the 100-period simple moving average around $4,533, while silver trades below its 20-day EMA at $76.02, with a subdued RSI indicating lingering selling pressure [2][3]. Market participants are now focused on upcoming US economic data, including weekly jobless claims and the Nonfarm Payrolls (NFP) report on Friday, as well as further geopolitical developments, for additional cues on the direction of the USD and precious metals [2][3].
Swiss National Bank Chairman Martin Schlegel commented that the Swiss Franc’s real overvaluation is notably lower than its nominal overvaluation, and reiterated the central bank’s readiness to intervene in the foreign exchange market to counter safe-haven appreciation pressures stemming from Middle East tensions [1].
CONCLUSION
The Israel-Lebanon ceasefire has eased immediate safe-haven demand for the US Dollar, supporting rebounds in gold and silver prices and strengthening the Swiss Franc. However, persistent geopolitical risks and expectations for a hawkish Federal Reserve continue to limit upside for precious metals. Market participants remain cautious, awaiting further US economic data and geopolitical developments for clearer direction.