SAFAKNA TURKEY – After November data on inflation in the US, which yesterday turned out to be below economists’ expectations, the markets rallied. While this inflation slowdown indicates that the worst is over; World stock indices rose sharply. The dollar has lost strength around the world and US bond yields have fallen.
Gold prices in yesterday’s trades rose to $1,824 due to an inverse correlation effect, reaching their highest level since June 30. Gram Gold, which rose in value as a result of the rise in gold prices, also reached its all-time high of 1,093 liras.
Now the eyes and ears of the markets are riveted to the messages of the US Federal Reserve System (FRS)… Today ends the December meeting of the Federal Open Market Committee (FOMC), which determines the Fed’s monetary policy. The Fed will announce its interest rate decision at 22:00 Turkish time. Fed Chairman Jerome Powell Speech at 22:30 After yesterday’s unexpected inflation data, it is clear that the Fed will raise interest rates by 50 basis points. President Powell’s speech will be critical. Powell’s speech will look for clues as to when interest rate hikes will peak.
Looking at market pricing after the inflation data, the Fed is expected to keep interest rates in the 4.75-5.00% range. This means that at the meetings that take place in February and March, interest rates can be increased by 25 basis points each.
LATEST GOLD PRICE SITUATION
Gold, which hit a 5.5-month high yesterday, is trading between $1,806 and $1,813 today. It is currently trading at $1,809, down 0.08 percent.
Gold per gram, on the other hand, is trading at 1,084 lira, down 0.05 percent as of 11:26 a.m. due to lower ounces. At the same time, a quarter of gold is sold for 1,793 liras, and republican gold for 7,365 liras.
If the Fed comes out with hawkish interest rate hikes at the next meetings, we can expect that the risk appetite in the markets will decrease. This could strengthen the dollar around the world and put pressure on gold prices. On the contrary, with the Fed’s confirmation that inflation is slowing down and the message that it has slowed down the increase in interest rates, a trend towards risky assets may emerge. This, in turn, could reduce the demand for the dollar and increase the price of gold.
Also tomorrow the interest rates of the Bank of England and the European Central Bank will be important for the markets.
2023 COULD BE MORE POSITIVE THAN GOLD
Onurkan Bal – Associate Investment Advisory Manager at Gedik Investment: The strong strengthening of the dollar due to the Fed’s aggressive interest rate hike in 2022 has been the main factor putting pressure on ounces of gold. However, easing fears about the Fed’s aggressive tightening in recent months and estimates of peaks in global inflation have left the dollar on a weaker global outlook since early October.
With the dollar weakening on the ounces of gold front, recovery efforts have come to the fore since November. An ounce of gold that traded at $1,600 in early November is currently testing levels above $1,800. While the November CPI, released yesterday in the US, rose 0.1 percent on a monthly basis, the annual CPI fell from 7.7 percent to 7.1 percent. Market expectations were that the CPI would increase by 0.3 percent per month and the annual CPI would be 7.3 percent. After the inflation rate, which fell more than expected in November after October, it was clear that the dollar depreciated, and the growth per ounce strengthened yesterday.
END OF THE DOLLAR RALLY?
With the Fed’s aggressive tightening cycle now behind us and expectations that the rate hike cycle will end with a modest rate hike in the first half of 2023, general market sentiment is that the dollar’s rally has come to an end. are ending in recent months and that dollar weakness could come to the fore in the coming periods. While the Fed’s rate hike cycle continues, we think there may be fluctuations in the ounce of gold from time to time, but we see 2023 as a more positive year for the ounce of gold. Of course, in this process, the forecast of global inflation and the decisions of central banks, especially the Fed, will be crucial for the price of gold.
In a week when central bank meetings are highlighted, the Fed’s interest rate decision tonight and the BoE and European Central Bank’s interest rate decisions on Thursday will follow. In light of recent guidance from Fed members and Fed Chairman Powell, markets are confident that the Fed will raise interest rates by 50 basis points at its December meeting. Although a 50 basis point rate hike is included in the price, the forecasts to be released at the end of the Fed meeting and Fed Chairman Powell’s post-meeting messages will be critical.
The peak rate predicted by FOMC members in 2023 and Powell’s progress messages are forecast to be critical for sub-ounce prices. If the hawkish tone outweighs Powell’s statements, there could be a sub-ounce regression, and if we see more dovish statements, it could be buyer pricing.
THESE LEVELS ARE CRITICAL
With continued growth under an ounce, the levels of $1825-1848-1880 and $1900 can act as resistance. For holdings above $1,900, $1,950 and then $2,000 may come to the fore. On pullbacks, if it falls below $1800, the levels of $1780-1765 and $1730 may follow as support. On the other hand, on the Gram Gold front, the overall rate of less than an ounce has had an impact due to the tight dollar-to-Turkish lira exchange rate in recent months. The analysis we shared on ounce gold could be taken as a basis for gram gold due to the tight exchange rate.