LAST MINUTE: In response to record inflation in the US with interest rate hikes, the Fed’s effects on gold and dollar prices continue. As US Federal Reserve (Fed) officials continue their verbal guidance on monetary policy, the government is also sharing possible policies with the public in the face of growing recession concerns.
After the strongest interest rate hike in 28 years, Fed officials continued their monetary policy statements, while Richmond Fed Chairman Thomas Barkin said the Fed has made it clear that it will do whatever it takes to cut back. high inflation, even as the risk of a recession increases. Speaking at an event in Richmond, Barkin said: “We have made it clear that we will do whatever it takes to reduce inflation. Of course there is a risk of a recession, but there is also the possibility of the economic outlook coming back. to normality “.
FAST CALL OF THE FED MEMBER
Speaking at a webinar organized by NABE, Barken also said it would be “quite appropriate” for the Fed to raise the interest rate by 50 or 75 basis points at its July meeting. “I’m quite comfortable with what Powell said. He’s delivered a series of rate hikes that looked pretty reasonable,” Barkin said.
“We want to get back to the 2% inflation target as quickly as possible without breaking anything,” said Barkin, adding that he will focus on inflation and inflation expectations until the July meeting and follow the signals from the demand side. After the events he attended, Barkin also answered his questions to his reporters and said that the stable growth, employment and inflation experienced by the US economy over the past 10 years may not return quickly.
“It doesn’t seem very likely to me that it will go back from a very stable state to a very volatile one and then stabilize again,” said Barken, who predicted that a two-year period would be highly unstable.
POWELL’S SPEECHES WILL BE FOLLOWED
While the steps to be taken after July are expected to provide more understandable clues as to whether or not the US economy will enter recession, Powell is expected to provide guidance on this period in his speech tomorrow.
DOLLAR AND EURO
With these developments, the dollar index was trading negative throughout the day, despite FOMC members’ statements on the aggressive side and expanding US bond yields. While the positive trend in the indices caused the dollar rate to sell off, partially reinforcing risk perception, there was an increase in value against the dollar in most of the G-10 currencies. The index, which briefly fell below the 104 level during the day, closed in the region of 104,400, while the euro / dollar, which returned much of its intraday gains, closed at 1.0530 with a slight gain. The dollar started the day at 17.34 on Wednesday 22 June, while the euro appreciated to 18.24 lire in the same minutes.
GRAMS AND GOLDEN CEMENTS
The price of the ounce of gold, on the other hand, spent the day with an undecided trend due to the depreciation of the dollar and the rise in yields on US treasuries. While trading above the $ 1,840 level, the ounce gold price was bought in the region of $ 1,830, seeing more selling towards the end of the session, ended the day at the low of the day. While the ounce gold price is currently moving into the red zone at $ 1827, the gold price per gram meets the buyer at $ 1019 after starting the day at $ 1021.
YEAR END GOLD FORECAST
During the investor survey of gold price predictions, 3 new assessments were made by James Steel, Principal Analyst of Precious Metals, Rhona O’Connell of StoneX Financial Ltd and Suki Cooper of HSBC Securities.
Suki Cooper said she expected the gold price to drop to $ 1,750 in the fourth quarter and made the following assessment:
“We should start to see the impact of rising real interest rates on demand. Eventually, we will begin to see its inflation go down. Then we will see that some of this long-term interest in gold will begin to fade. “
“THE STRENGTHENING OF THE FED AND A HEAVY DOLLAR WILL HARD FOR THE PRICES OF GOLD”
James Steel, on the other hand, reiterates his firm’s prediction that gold prices will drop below $ 1,800 in the second half of the year. He also shares his forecast for the annual average of $ 1,820. He says gold will not just struggle with rising real interest rates. He also notes that he expects the US dollar to stay higher and create a second advantage for the precious metal. Furthermore, the analyst makes the following statement:
“The continued tightening of the Fed and a relatively solid dollar will be two weights gold will have a hard time managing.”
“OVER 2000 DOLLARS DIFFICULT BUT …”
Rhona O’Connell also predicts lower prices for gold. However, she says that any drop below $ 1,800 could generate strong buy signals. She also says that prices may continue to be supported at current levels. “Covid-19 restrictions in China have significantly reduced gold purchases,” the analyst said. This means that there are a lot of pent-up requests waiting to be released. “Gold prices are hard to see above $ 2,000, but I’m not as bearish as Suki and Jim.”