Markets are quite active with US inflation returning to its 41-year high … As rising inflationary risk raises the expectation that the Fed and then other central banks may become more aggressive in rate hikes. interest; This is the biggest risk to gold prices.
Markets became active as U.S. May inflation data announced on Friday surpassed market expectations and renewed the highest level in 41 years. While heavy selling is seen in the global stock market indices; US bond yields and the dollar index continued to strengthen. While the prices of gold and silver have been suppressed; There has been a strong sell-off in the cryptocurrency markets.
The fact that US inflation in May hit 8.6% and peaked since 1981, reducing risk appetite in the markets; pushed investors into safe havens. While the bond and the US dollar, which are seen as safe havens, continue to rise; Gold prices are suppressed by the inverse correlation effect. On the other hand, rising global inflationary risk and the recession worry investors to direct investors to precious metals and support gold prices. With these developments, fluctuating movements in gold prices are observed.
Failure to avoid global inflation risk could cause other central banks, notably the US Federal Reserve (Fed), to raise interest rates more rapidly. If so, dollar assets around the world can be expected to strengthen, US bond yields will rise and gold prices will be suppressed.
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EYES ON FED
The June meeting of the Federal Open Market Committee (FOMC), which sets the Fed’s monetary policy, begins tomorrow. The Fed will announce its interest rate decision Wednesday at 9:00 pm 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.
While markets are expecting a 50 basis point rate hike from this Fed 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
On the first trading day of the week, the price of the ounce of gold follows a selling price under pressure from the Fed. While the dollar index has risen to the level of 104.91 with the price that the Fed may increase interest rates more aggressively; US 10-year bond yields rose 3.30%, reaching their highest level in 11 years. The yield on the US 2-year bond, which is more sensitive to Fed policy changes, rose to 3.25%. The yield on the US 2-year bond therefore reached a 15-year high.
ounce of gold; It saw the low of $ 1823 and the high of $ 1879 during the day. On the other hand, the ounce of gold is moving to the level of $ 1827 with a decline of 2.40 percent in the following minutes.
While the price per gram of gold continued to depreciate due to the decrease in the price of gold in ounces; It saw the maximum of 1043 lire and the minimum of 1011.30 lire during the day. Gram gold is at the level of 1012.61 lire, with a decrease of 1.64% at 5:35 pm. In the same minutes a quarter of gold is exchanged for 1665 lire and the gold of the Republic for 6 thousand 850 lire.