Despite record inflation in the US and rising interest rates, the Fed’s influence on gold and US dollar prices continues. As big banks’ explanations of gold price predictions kept coming, economists from Deutsche Bank, one of Germany’s largest banks, set a new record in their forecasts. While economists say it will continue to attract gold as a safe haven, they also share the story. So, gold goes up or down? Here are the details of the latest news.
As recession fears continue, a positive process is observed in global markets and the effect of this is a possible soft landing for economies. While Fed officials continued to provide verbal guidance on monetary policy, the administration made policy possible publicly in the face of mounting recession fears. Yesterday Fed Chairman Louis James Bullard said he will support a sharp hike in interest rates in July if macro data matches his expectations and said inflation could be lowered without putting the US economy into recession. .
Ahead of Fed Chairman Jerome Powell’s speech tomorrow, it is almost certain that the Fed will raise rates by 75 basis points at its next meeting, while the probability of a 75 basis point hike at its September meeting stands at 40%.
Gold prices on the rise
Although the steps that are expected to be taken after July will provide more easily understood clues as to whether the US economy is in a recession or not, Powell is expected to provide guidance for that period in his speech this week. While the stock market is following a positive, albeit cautious path, determined to fight inflation and with expectations that the US economy can get through this period without going into recession, the statement made today by Fed officials has also become the focus. of attention to investments.
While the statement by ECB President Christine Lagarde was high on the European agenda yesterday, Lagarde said ECB officials are planning to raise interest rates at their July and September meetings. Lagarde said they could raise interest rates by 25 basis points in July and that while there are lingering doubts about how to take action on bond yields, it’s still early days to make a statement on the matter. ECB chief economist Philip Lane said negative interest rates are no longer appropriate in the euro area, adding that raising policy rates will increase the risk premium for all economic units.
FED statement received
The dollar is not far off a 20-year high after the Fed hiked rates by 75 basis points. The expectation that Fed rate hikes will continue at full speed and that some Fed officials predict it will take a few years for inflation to hit the 2 percent target, supports the dollar. The US dollar index is currently at 104.19. Experts said Fed Chairman Jerome Powell’s statements to the Senate Wednesday and Thursday could apply to the dollar. The EUR / USD parity in Europe strengthened with the announcement and climbed to 1.054. With these developments, the exchange rate in the horizontal direction dominates the exchange rate as it was yesterday. While the USD / TL remained flat at 17.31-17.32 levels, the Euro / TL was trading around 18.31.
Another development that will affect the exchange rate will be the interest rate decision to be announced by the Central Bank of the Republic of Turkey on Thursday 23 June. As the market anxiously awaited the decision, the economists’ forecasts became clear. The CBRT expects to keep the weekly repo rate at 14.00%.
On the first trading day of the week, gold trading in the 1830-1850 range observed a horizontal movement and closed at $ 1838.50 horizontally. An ounce of gold costs $ 1,837 this morning. Restrictive measures by central banks in developed countries, particularly the US Federal Reserve, are said to have triggered fears of economic recession in the markets, weakened perception of market risk and increased demand for safe havens. Analysts pointed out that the demand for the ounce of gold could be relatively strong in this market momentum.
While investors watched market developments with interest, economists at the leading German bank Deutsche Bank critically assessed the yellow metal. Analysts expect an ounce of gold to retain its safe-haven appeal. He also predicted that the precious metal would be around $ 2,100 in June 2023.