Gold prices plummeted as US inflation numbers came in better than expected. Experts explained that the decline could deepen and that the Fed’s tightening signals should be closely monitored.
After falling more than 1 percent yesterday following US inflation data, gold prices followed a flat course as the US Federal Reserve (Fed) continued to raise interest rates.
Following the inflation numbers, concerns grew that the US Federal Reserve (Fed) would pursue tougher interest rate hikes as the fall in gold prices deepened.
Yesterday, before inflation was announced, gold was at the level of $1730 an ounce, and after the release of the data it was lowered to the critical $1700 level.
Gold prices fell as inflation figures were released (red area)
US consumer inflation in August came in ahead of expectations at 0.1 percent on a monthly basis and 8.3 percent on an annual basis. After US inflation data beat expectations yesterday, the dollar continued to rise as the Fed forecast that it will strengthen next week. The rise in the dollar, on the other hand, pushed down the price of gold, which does not yield any interest.
As markets debate for weeks whether the Fed’s tightening moves are fully priced in, many investors are expecting a 75 basis point hike at next week’s monetary policy meeting. On the other hand, the markets now believe that a rate hike of 100 basis points is possible. The Fed raised interest rates by a total of 225 basis points this year.
“Shockingly hot inflation data caused investors to price in further Fed tightening, which hurt gold,” said Ed Moya, senior market analyst at Oanda. Moya said a 75 basis point rate hike was a strong forecast for September and a November cut was less likely.
“GOLD PRICES MAY FALL FURTHER”
Gnanasekar Thiagarajan, director of risk management services at Commtrendz, based in India, said: “Higher-than-expected inflation has turned the light on precious metals.”
Thiagarajan explained that the probability of a 100 basis point rate hike reached about 40 percent at the Fed meeting, saying, “Gold prices will tend to test the $1670-$1675 levels in the coming meetings,” he said.
EYES ON THE FED: MEETING OUTCOME IS CRITICAL
The Gedik Investment Forex Daily Bulletin’s review on the subject noted that “the strengthening of the dollar on data supporting the Fed’s 75 basis point rate hike led to selling in US stock markets and commodities.”
In the report, experts said: “The Fed’s Sept. 21 meeting next week will be followed. The market is eyeing the 75 basis point rate hike for the Fed with certainty. Until that day, the dollar could remain positive and this could put ounces of gold under pressure.
Finally, the report states, “Although no new trend in ounces is expected before September 21, it may be more accurate to speak of a direction in ounces consistent with statements emerging from the Fed’s September 21 meeting.” will come out in September.”
THE LATEST SITUATION IN THE GOLD MARKET
After the US inflation data released yesterday beat expectations, the gold ounce price, which started the day down 1.3 and ended the day at $1702, traded at $1700 in the morning.
After starting the new day flat, the gram price of gold was trading at 999 liras as of 10:45 am. In the same minutes quarter gold was sold for 1,640 lire and republic gold for 6,690 lire.
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