Price Performance Indicator

Gold focus:

• In a week (4/07 – 8/07) ICDX gold price fell 3.6%
• Expectations of a rate hike by the Fed.

MARKET REVIEW

ICDX gold prices moved 3.6% lower compared to the previous week with prices moving lower after a 75 basis point increase in interest rates in July by the Fed weakened the appeal of the safe-haven metal.

United States inflation, which was at the level of 8.6%, according to the United States Bureau of Employment Statistics, the rate surpassed the record high inflation which was previously at the level of 8.5%. High inflation has led the market to expect the Fed to raise interest rates by 75 basis points in July to suppress high inflation. The movement of gold will be difficult to strengthen amid expectations of rising interest rates. Market expectations of rising interest rates affect the movement of gold. This condition makes gold prices continue to weaken.

US dollar index moved up to the 106.20 zone on July 6, 2022, where this figure has passed its highest zone at the 105 level. The US dollar rose in line with market expectations of an increase in interest rates. Gold is considered a hedged asset in times of inflation. However, an increase in interest rates as an effort to suppress inflation makes gold less attractive. In addition, the yield on US government bonds moved at the level of 2.838% compared to the previous level of 2.805%. The increase in the US dollar and yields of US government bonds put pressure on gold prices, because as a safe-haven asset gold does not offer yields so investors prefer to invest in financial products.

MARKET VIEW

The results of the Federal Open Market Committee (FOMC) meeting which were released show that the Fed is planning to take aggressive policies. The results of the meeting indicated an increase in interest rates by 75 basis points in July. This policy will be implemented if US inflation does not also sag. The current movement of gold will depend on the increase in interest rates by the Fed. Gold as a safe-haven asset will be depressed because gold does not offer a good return.

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