Record prediction for gram gold after the surprise interest rate decision by the FED.

The statement from the Federal Reserve (FED) stated that the decision to cut interest rates by 50 basis points was taken with 11 votes in favor and 1 vote against. It was reported that Michelle Bowman was in favor of a 25 basis point interest rate cut and voted against. The statement stated that the target range for the federal funds rate was reduced by 50 basis points to 4.75-5.00 percent, taking into account progress in inflation and risk balances. FED Chairman Powell used the expression "upside risks to inflation have diminished, downside risks to employment have increased". After the surprise interest rate decision by the FED, there was good news for investors regarding gram gold.

FED LAST CUT INTEREST RATES IN 2020

In March 2020, the Fed lowered its policy interest rate to the range of 0-0.25 percent due to concerns about the economic effects of the new coronavirus outbreak and implemented monetary expansion. Later, facing rising inflation in the country, the Fed completed its asset purchase operation in 2022 and started raising interest rates. Since March 2022, the Fed has implemented a total of 11 interest rate hikes and increased the interest rate by a total of 525 basis points. The bank's policy rate reached its highest level since 2001, ranging from 5.25-5.50 percent with these increases. The Fed, which made a 25 basis point increase in the policy rate in July 2023, did not change the interest rate in the current range in 8 consecutive meetings. After reaching the highest level since 1981 with an annual rate of 9 percent in June 2022, inflation in the US was realized at 2.5 percent in August, parallel to expectations.

"ECONOMIC ACTIVITY CONTINUES TO EXPAND AT A SOLID PACE"

In the statement made after the two-day Federal Open Market Committee (FOMC) meeting, it was stated that according to recent indicators, economic activity continues to expand at a solid pace. The statement pointed out that employment gains have slowed down and the unemployment rate has risen but remained low. The statement stated that inflation is progressing towards the FOMC's 2 percent target but continues to remain high, and stated, "The FOMC gained more confidence that inflation is moving sustainably towards 2 percent and decided that the risks to achieving the employment and inflation goals are roughly balanced." The statement emphasized that while the FOMC considers making additional adjustments, it will carefully evaluate the incoming data, evolving outlook, and balance of risks, and highlighted that the Committee is strongly committed to supporting maximum employment and returning inflation to the 2 percent target.

FED CHAIRMAN POWELL: RISK TO INFLATION HAS DECREASED

Fed Chairman Powell stated, "Upside risks to inflation have diminished, downside risks to employment have increased."

LATEST PREDICTION FOR GOLD AFTER THE SURPRISE DECISION

Economist Hikmet Baydar, speaking to Milliyet about how the surprise decision will affect gold, said, "The Fed is trying to calm the market with a 50 basis point cut. This means that the dollar will lose more value than expected and that the price of ounce gold will accelerate towards $2700. If a recession comes to the fore in the future, it will not be good for the stock market. If the market is interpreted positively with the expectation of liveliness due to the interest rate cut, the stock market may react positively to this."

EXPECTATION FOR GRAM GOLD

Baydar emphasized that in the long term, gram gold will reach the level of 3,000 TL and said, "Technically, gram gold will continue its upward trend with minor fluctuations. The target of 3,000 TL by the end of the year is maintained. In case of new hot developments in the Middle East and an increase in Israel's cyber attacks increasing the hot contact in the region, if there is a negative development in this regard, the target of 3,000 TL can be realized in a very short time, which means that the market will be more aggressive."

"GOLD STILL BENEFICIAL"

Economist Hikmet Baydar continued, saying: In such environments, gold still seems advantageous. Commodities can go up. In this situation, the stock markets can rise, but it will not be good for the stock market if recession concerns come to the fore.

HOW DOES THE GLOBAL RELAXATION OF THE DOLLAR AFFECT THE USD/TRY?

The dollar continues to weaken globally. This leads to the weakening of the dollar against these pairs. The euro/dollar exchange rate is at the level of 1.11. Since the dollar will lose value against the pairs, there may be a relaxation against the TL as well. There are still downward signals in the USD/TRY, but the decline remains limited. Currently, the USD/TRY is moving sideways. It seems to move in both directions, but there is an environment in the global conjuncture that will cause the dollar to fall. In such an environment, the USD/TRY needs to fall."