The Federal Reserve's key measure of inflation has been released

The Federal Reserve's key measure of inflation has been released

The Federal Reserve's key measure of inflation has been released, providing us with information to help determine future interest rate movements.

Data on personal spending & durable goods

The personal consumption expenditures price index rose by 4.7%, higher than the expected 4.6%. This is an increase from the previous reading of 4.6%. The Federal Reserve is aiming to lower this number to 2%.

The core personal consumption expenditures price index rose by 0.4% last month, which was higher than the expected 0.3%. This followed a rise of 0.3% the previous month.

The annual personal consumption expenditures price index increased by 4.4% compared to its last reading of 4.2%. On a monthly basis, the index increased by 0.4%, higher than the previous reading of 0.1%.

Durable goods orders declined by 0.2% last month, which was weaker than the expected reading of no change from the prior month's 0.3% increase. However, excluding transportation orders, durable goods rose 1.1%, compared to the forecasted drop of 1%.

Gold & Dollar Now

Gold prices rose 0.25% to $1,945 an ounce while US gold futures closed at $1,944. The dollar index dropped 0.13%, settling at 104,052 points.

The world's biggest purchaser of gold has suddenly sold off a large portion of its holdings

Turkey sold nearly 81 tons of gold in April & 15 tons in March after buying more gold than any other central bank in 2022. Analysts suggest that the country's high domestic demand for gold & limited imports led to the large decrease in its gold reserves.

A sharp decrease in purchases after reaching a record high

In April, Turkey's official gold reserves decreased by 80.8 tons to 491.2 tons, according to the World Gold Council's Chief Analyst Krishan Gobul. Gobul stated on Twitter that the gold was sold to meet local demand in the local market.

The Turkish central bank's foreign exchange reserves decreased by 15% to $9.5 billion in the weeks before the country's general elections, according to data from the Financial Times. This drop in reserves occurred as Recep Tayyip Erdogan's government attempted to strengthen the economy & local currency prior to voting.

Turkey's central bank bought more gold than any other bank in 2022, which resulted in their official gold reserves reaching an all-time high of 542 tons. This was done as a way to protect the country from rising inflation rates.

The demand for gold in Turkey's domestic market rose significantly over the past year, as people used it to protect themselves from inflation & a weakening currency. Inflation is projected to exceed 85% at some point in 2022.

Gold imports increased significantly, causing Turkey's current account deficit to widen to its highest level in January. To address this issue, the country implemented measures in February to limit gold imports & improve the deficit.

In March, Turkey's current account deficit decreased to $4.5 billion. Despite this reduction, domestic demand for gold has increased, prompting the central bank to sell off its gold reserves in order to fulfill it.

The biggest winner is the central bank

Turkey's domestic demand for gold is driven by the desire to protect their purchasing power as the lira declines. Selling gold to domestic consumers can benefit the Turkish central bank, even in times of economic crisis. William Stack, a financial advisor at Stack Financial Services LLC, highlighted this fact.

Turkey is selling gold to help strengthen their currency, the lira. Last year, gold was up 10% in terms of US dollars; however, when converted to the lira it has increased by 70-85%. By selling gold domestically for lira, it removes some of the lira from circulation & increases its value.

Stack noted that selling gold reserves to local consumers restricts citizens' ability to purchase foreign currency, as this controls the value of the lira and makes it less susceptible to speculators. Attention is now on the upcoming runoff between President Recep Tayyip Erdogan and his opposition, Kemal Kilicdaroglu, which will take place next Sunday.