LAST MINUTE: Responding to record US inflation with an interest rate hike, the Fed’s effects on gold and dollar prices continue. As US Federal Reserve (Fed) officials continue their verbal guidance regarding monetary policy, the government side also shares potential policies with the public in the face of growing recession concerns.
After the biggest interest rate hike in 28 years, Fed officials continued their remarks on monetary policy, while Richmond Fed Chairman Thomas Barkin said the Fed has made it clear it will do whatever it takes to reduce inflation. high, even if it increases. the risk of recession. 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 recession, but there is also the possibility that the economic outlook will return closer to normal.”
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Speaking at a webinar hosted by NABE, Barken also said it would be “quite appropriate” for the Fed to raise interest rates by 50 or 75 basis points at its July meeting. “I’m pretty comfortable with what Powell said. He gave a series of rate hikes that seemed pretty reasonable,” Barkin said.
“We want to get back to the 2 percent inflation target as soon as possible without breaking anything,” Barkin said, adding that he will focus on inflation and inflation expectations until the July meeting and follow demand-side signals. After the events he attended, Barkin also answered their questions to his journalists and argued that the steady growth, employment and inflation experienced by the US economy over the past 10 years could not quickly return.
“It doesn’t seem very likely to me to go from a very stable state to a very volatile state and then stabilize again,” said Barken, who predicted that a two-year period would be highly unstable.
POWELL’S SPEECH WILL BE FOLLOWED
While measures to be taken after July are expected to provide more comprehensive clues as to whether or not the US economy will enter recession, US Federal Reserve Chair Jerome Powell’s speech to the US Senate will follow. It is hoped that Powell’s speech will provide guidance on this period.
DOLLAR AND EURO
With these developments, the dollar index traded negative throughout the day, despite statements from FOMC members on the hawkish side and expansion in US bond yields. While the positive evolution of the indices caused a fall in the dollar exchange rate by partially strengthening the perception of risk, there was a gain in value against the dollar in most of the G-10 currencies. The index, which dipped below the 104 level for a short time during the day, closed in the region of 104.400, while the euro/dollar, which gave back most of its intraday gains, closed at 1.0530 with a slight gain. The dollar started the day at 17.34 on Wednesday, June 22nd, while the euro appreciated to 18.24 lira in the same minutes.
GRAMS AND ONCEMENTS OF GOLD
The price of an ounce of gold, on the other hand, spent the day undecided on account of the devaluation of the dollar and the rise in yields on US treasury bonds. When selling above the $1,840 level, the ounce price was long in the $1,830 region, seeing more selling later in the session, ended the day at the lows of the day. While the price of an ounce of gold is currently moving in the red zone at 1827 dollars, the price of a gram of gold finds the buyer at 1019 lira after starting the day from 1021 lira.
YEAR-END GOLD FORECAST
When investigating gold price predictions by investors, 3 new assessments were made by James Steel, Principal Precious Metals Analyst, Rhona O’Connell of StoneX Financial Ltd and Suki Cooper of HSBC Securities.
Suki Cooper said he predicted the gold price would 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 start to see your inflation go down. So we will see some of that long-term interest in gold start to dissipate.”
“POWERED GRIP AND A STRONG DOLLAR WILL WEIGHT FOR GOLD PRICES”
James Steel, on the other hand, repeats his company’s prediction that gold prices will fall below $1,800 in the second half of the year. It also shares its forecast for the annual average of $1,820. He says gold will not struggle just with rising real interest rates. He also notes that he expects the US Dollar to remain higher and create a bullish second upside for the precious metal. In addition, the analyst makes the following statement:
“Continued tightening from the Fed and a relatively solid dollar will be two pesos that gold will have a hard time dealing with.”
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Rhona O’Connell also predicts lower prices for gold. However, he claims that any dip below $1,800 can generate strong buy signals. He also says prices may remain sustained 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 orders waiting to be released. “It’s hard to see gold prices above $2,000, but I’m not as pessimistic as Suki and Jim.”