As we begin a new week, the price of gold continues to remain near record levels. Demand for precious metals is increasing daily, while macroeconomic developments in the US were followed closely last week. Critical inflation data from the US was released, with both headline and core inflation coming in significantly higher than expected. The headline inflation, expected at 2.9%, was reported at 3.00%, while core inflation, expected at 0.3%, was reported at 0.4%. With inflation coming in above expectations, the Fed's interest rate cut expectations for 2025 remain limited to one, with predictions pointing to a rate cut in July. However, this conclusion is drawn only by focusing on macroeconomic developments.
Additionally, there are political developments, as Donald Trump and his team plan to increase oil production again by about 3.00%. The increase in oil production could put inflationary pressure on the US economy, which could in turn support the case for interest rate cuts. This week, all eyes will be on the FOMC meeting minutes and Donald Trump's decisions!
We kicked off the week with Japan's critical Q4 GDP data! The Japanese economy grew by 0.7% in the last quarter, surpassing expectations of 0.3%! With Japan’s growth exceeding expectations, the likelihood of an interest rate hike has strengthened. A rate hike in Japan could weaken the strength of the US Dollar in the coming period.
Technically, the $2845 zone for gold corresponds to the 233-day exponential moving average. If the price stays above this level, we may see further upward movement for gold. Specifically, the Fibonacci region at $3120 remains a medium-term target.
Along with the movement in gold, Turkey’s gram gold prices have also reached historical record levels. This week, the Central Bank of the Republic of Turkey (CBRT) is expected to announce its interest rate decision, and we anticipate that interest rate cuts will continue. These rate cuts will likely lead to a slight upward movement in the exchange rate. Currently, the Dollar/TL rate on the Grand Bazaar is around 36.28, while gram gold prices have set a new record at 3465 TRY. With the record being broken, premiums in Turkey for gold in terms of the ounce have risen by up to $55, while the kilogram price has formed around $1500 higher than the London market.
According to the CME FedWatch, the probability of a 0.25% rate cut in July is priced at about 44%.
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