Gold prices hit a 9-month low last week, while the dollar index hit a 20-year high. The critical data that will affect prices will come from the US next week. In the US economy, between high inflation and recession, we see that the US Federal Reserve (Fed) gives priority to inflation. According to data released on Friday, non-agricultural employment in the US increased by 372,000 people in June, exceeding market expectations, while the unemployment rate remained unchanged at 3.6 percent. Although the strong labor market indicates that the Fed will maintain its hawkish stance in monetary policy, the strengthening of expectations to keep inflation in check continues to be viewed positively by the markets despite the possibility of a recession.
Fed officials said in their statements during the week that the risk of recession may not be as strong as feared and that their priority is to control inflation. Fed board member Christopher Waller noted that inflation is very high and unlikely to decline. st. Fed Chairman Louis James Bullard expressed that he expects the US economy to continue growing this year and signaled that he is in favor of a 75 basis point rate hike at the July meeting.
With increasing selling pressure in bond markets following Fed officials’ statements and labor market data, the yield on 10-year bonds in the United States has exceeded 3 percent, while the recessionary price in swap markets has fallen. it is weakened, albeit partially. In pricing in money markets, an increase of 75 basis points in the July meeting and an increase of at least 50 basis points in the September meeting are considered certain.
Despite the selling trend of the bond markets, the dollar index reached its highest level in the last 20 years with 107.8, after fears of inflation and the growing demand for dollars as a safe haven, and ended the week in 107 with an increase of 1.8 percent.
Although the price per barrel of Brent oil, which fell to $ 97.2 due to recession woes during the week, partially offset the losses with the announcement of a $ 220 billion infrastructure package from China and US labor market data. solid and steady, this week fell 4.7% to 105.5. .
The price of the ounce of gold also followed the downward trend for the fourth consecutive week, dropping to $ 1,742 with a weekly depreciation of 3.8%.
Gram gold is at a bad level for 1 month
Although the price of the gram of gold was affected by the sharp drop in ounces in the domestic market, it did not show a significant drop due to the increase in the dollar exchange rate. Starting the week at 976 lire, the gram of gold fell to 959 lire on Tuesdays and Wednesdays due to the sharp drop in ounces and recorded the lowest level on a weekly basis. On Thursday and Friday, the gram of gold, which recovered due to the rise in the dollar, completed the week at 967 lire. Looking at the price action on a weekly basis, the gold gram caused its investors to lose 0.87%. Therefore, the gram of gold has followed a downtrend for the past 4 weeks.
While US equity markets followed a positive trend this week, eyes have been on the intense data schedule, especially the inflation data to be announced Wednesday next week and the verbal guidance from Fed officials. estimates that the consumer price index (CPI) to be announced in the country may have increased last month, the CPI trend is expected to have an impact on asset prices. In the country, which is already pricing in swap markets that the country will enter recession in the next 6-18 months, the Fed’s strong stance in fighting inflation further increases the importance of CPI data.
The Wall Street Prediction
This week, 15 Wall Street analysts took part in Kitco News’ gold poll. Of those surveyed, 40 percent are optimistic about gold in the short term. 33 percent are in a downtrend relative to gold. Another 27 percent remained neutral on the precious metal next week. 484 votes were cast in the Main Street online polls. 42% of them expect gold to rise next week. 38% predict it will be lower. 20% remained neutral in the short term. Sentiment among individual investors remains low. However, the participation rate is also low. This is interpreted as an indication that the precious metal is receiving little attention in this volatile environment.
According to Commerzbank economists, the drop in the price of gold is extreme. Therefore, it is stated that the recovery of the precious metal is possible. “The main factor affecting the price of gold is the strong US dollar, which has risen to its highest level in nearly 20 years,” the economists said, adding, “EFT investors are turning their backs on gold. Gold EFTs followed by Bloomberg have seen outflows of nearly 60 tonnes in the past two weeks alone. However, we believe the current price weakness is exaggerated. Constantly high inflation and risk of recession in favor of gold. This shows that the price will recover, “they commented.