The price of the ounce of gold continues to move under pressure with the price that the Fed may raise interest rates faster. The eyes of gold investors will be on the Fed’s interest rate decision, to be announced tomorrow, and the messages to be given thereafter. The clues that the Fed will give to the markets will be instrumental in finding the direction of gold prices. Hüseyin Uslu, a specialist in integral investment research, assessed all developments on gold prices in Bigpara.
As the price of the ounce of gold moved in the tight range last week; The US came under pressure as May inflation renewed its 41-year high. After the surprise inflation data, the expectation that the US Federal Reserve (Fed) might become even more aggressive in its interest rate hikes began to be discounted by the markets. The dollar index, which measures the value of the US dollar against 6 currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, rose above the 105 level again; The US 10-year bond yield had reached its highest level in 11 years in yesterday’s transactions, while the US 2-year bond yield had seen its highest level in 15 years yesterday. While US bond yields have fallen from today’s highs; The yield on US 10-year bonds is at the 3.29% level, while the yield on US 2-year bonds is at the level of 3.28%. Since gold prices in the ounce are inversely related to bond interest and the dollar index; The strengthening dollar and rising bond yields are putting gold prices under pressure.
EYES ON FED
The June meeting of the Federal Open Market Committee (FOMC), which sets the Fed’s monetary policy, begins today. The Fed will announce its interest rate decision tomorrow at 21:00 Turkish time. In addition to the rate hike decision, the Fed’s messages to the markets and statements by Fed Chairman Jerome Powell at the 9.30pm press conference will be key to providing clues about the tightening policy they will continue to follow.
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While market prices indicate that the Fed will raise interest rates by 75 basis points in this meeting; The level at which the Fed will withdraw the policy rate at the end of the year has gone from 2.75% to 3.50%.
THE LAST SITUATION OF GOLD PRICES
The price of the ounce of gold has fallen to $ 1810 in today’s transactions, seeing the lowest level since May 18th. While the ounce of gold saw the highest level of $ 1831; It is currently trading at $ 1822 with a rise of 0.16%.
While the gold gram price starts on the second trading day of the week at the horizontal level; It saw the highest level of 1015.68 lire and the lowest of 1005.32 lire during the day.
Gram gold, while rising due to the increase in the price of ounce gold, stood at 1011.75 lire with an increase of 0.22 percent at 13:50. In the same minutes, a quarter of gold is exchanged at 1,661 lire and the gold of the Republic at 6,828 lire.
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While the gold gram prices were moving at the level of 1013 lira at the closing time of the Turkish markets yesterday; started the new day at the level of 1014 lire.
GOLD CAN RESIST THE FED
Hüseyin Uslu – Integral Investment Research Specialist
Gold per ounce is weak ahead of the Fed rate decision, which we will follow tomorrow evening. The dollar continues to strengthen on a global scale, with annual inflation announced at 8.6% after US non-farm employment figures exceeded expectations. With inflation data continuing to rise, expectations rise that the Fed will maintain its tight monetary policy. Fed chairman Powell said they will continue to tighten monetary policy until inflation drops.
High inflation suggests the view that the Fed may be more aggressive than expected. While interest rate hikes of 50 basis points are expected in June and July, expectations that 75 basis points could increase in the June or July meeting that we follow tomorrow after inflation data strengthens the dollar. While the dollar index rose to the level of 105 in May; US 10-year bond yields stand at 3.29%. Rising dollar index and bond yields put pressure on the ounce of gold.
With the Fed interest rate decision on Wednesday, Fed Chairman Powell’s guidance on monetary policy in the coming period could create activity on an ounce of gold.
Until we get the message from the Fed, the ounce of gold may continue to be under pressure. The narrow band movement between $ 1836 and $ 1869, which we have been observing for a while, has been broken down. The new support that is gaining strength below looks like the $ 1807 level. We can look at the $ 1807 – $ 1836 range as the new movement area. Until an ounce of gold manages to stabilize above the $ 1842 level, where the 200-day moving average is, bullish expectations will remain weak.
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