While many uncertainties remain in the world, gold, traditionally seen as a safe haven asset, is not making its investors happy, contrary to what many might expect.
After falling to $1,693 an ounce in the morning, gold prices continued below $1,700 to open the market at $1,696. The ounce price declined 0.3 percent daily starting in the morning.
Looking at the last 1 month, the drop in the price of ounces has reached a percentage. On August 12, the ounce price had risen to $1,804. On the said date, however, verbal instructions from Fed officials began leaking to the market and the 75 basis point rate hike was heavily priced in at their September 21st meeting.
HE SAID ‘It’s gonna hurt’
On August 26, at the Jackson Hole meeting, Fed Chair Jerome Powell said that despite four straight rate hikes, it’s not time to stop: “It’s an unfortunate price to pay,” he said he. These statements, which markets deemed ‘hawks’, caused US Treasury yields to rise.
RISE IN US BOND EARNINGS
US 10-year Treasury yields rose to 3.35 percent today from 2.81 percent a month ago. Meanwhile, the yield on the two-year bond rose to a 15-year high of 3.55 percent last week and held above 3.50 percent this week.
While the rise in fixed rates led to a decline, positive economic data in the US helped the ounce price fall below $1,700 yesterday.
In the US, it was announced yesterday that the Supply Management Institute’s (ISM) Non-Manufacturing Index rose 0.2 points on a monthly basis to 56.9 in August, the highest level in 4 months. The expectation was that the index would fall to 55.3. This more positive than expected data was interpreted as the Fed still has no reason to slow rate hikes.
On top of that, the dollar index, which tracks the dollar’s performance against the major currencies, broke above the 110 mark again after a brief pause, hitting a 20-year high.
FORECAST REVISED DOWN
Given all these developments, the ounce price has lost 6 percent in the last 1 month. In this process, there have also been declines in gold price forecasts. Credit Suisse lowered its average ounce price forecast for the second half of the year to $1,725 from $1,850. Similarly, Goldman Sachs revised its forecast for the next 3 months to $1,850, which was previously $2,100.
Gram gold also fell 0.5 percent today to 995 lire. However, the increase in the exchange rate over the last month limited the fall in the price of gold in TL. Gram gold had seen 1.037 lira on August 12. Gram Gold lost 4 percent to its investor in about a month.
MORNING EYES ON ECB
Of course, not only the Fed but also other major economies prefer to raise interest rates to combat rising global inflation. Tomorrow the European Central Bank (ECB) will announce its eagerly awaited interest rate decision. Markets are expecting a 75 basis point hike from the ECB tomorrow, with annual euro zone inflation hitting a record 9.1 percent in August. If this happens, it will be the first time in its history that the ECB has decided to raise it at this level.
Although Russia created a potential energy crisis by cutting off the flow of natural gas from Nord Stream to Europe, tougher steps expected from the ECB kept the investor’s asylum request in the “safe haven”.
#Gold #investor #tastes #pain
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