How is Fed’s interest rate decision impacting gold, dollar?
A view of US dollars and gold bars. (Reuters File Photo)
The Federal Reserve’s decision to hold interest rates steady within the 5.25% to 5.5% range has sent ripples through global financial markets, with gold and the dollar exhibiting notable reactions.
Gold’s reaction
- Before Fed announcement: The price of gram gold was ₺2,581, and spot gold was at $2,422 per ounce.
- Post-announcement surge: Gold prices climbed shortly after the Fed’s announcement, with gram gold reaching ₺2,588 and spot gold increasing to $2,433 per ounce.
- Current levels: As of Thursday, gram gold opened at ₺2,610, with spot gold just 1% below its all-time high, at $2,445 per ounce.
Dollar’s movement
- Immediate impact: The dollar stood at ₺33.11 right before the Fed’s decision and inched up to ₺33.12 shortly afterward.
- Record highs: The dollar is now hovering close to its record level of ₺33.29, with current trading at ₺33.17.
- Global influence: The dollar index (DXY) recently tested 104.8 but has since retreated to 104, reflecting global reactions to the Fed’s dovish tone.
Market dynamics
- Geopolitical tensions: Rising risks in the Middle East, particularly following the assassination of Ismail Haniyeh, the head of the political bureau of the Palestinian resistance movement in Tehran, are adding to the volatility in gold prices.
- Interest rates and KKM accounts: The Turkish lira’s fluctuation is further influenced by the ongoing liquidation of Currency Protected Deposit (KKM) accounts, now subject to a new tax regime starting in August. The overnight TL interest rates have also dipped to 47%, the lowest in a month, affecting currency movements.
What’s next?
- For investors: Analysts advise caution, suggesting those looking to enter the gold market wait for a new price equilibrium, while those already holding gold maintain their positions.
- Market watch: Key economic data, including U.S. weekly jobless claims and July employment figures, are anticipated, alongside developments from the Middle East, which could further influence market trends.
Between the lines
The Fed’s steady rates signal potential shifts in monetary policy ahead, with speculation about a possible rate cut in September. This dovish outlook, combined with geopolitical uncertainties, is driving both gold and the dollar toward significant thresholds, making the markets highly reactive and unpredictable.
