Gold Finds Support After Warsh Remarks

Gold prices fell more than 1.5% to around $4,365 an ounce on Tuesday, their lowest level since August 19, as elevated US Treasury yields weighed on the non-yielding asset. Investors are also awaiting key US labour-market data for fresh clues on the Federal Reserve’s monetary policy outlook. US Treasury yields climbed to their highest level since January 2025 as rising Middle East tensions stoked inflation concerns, strengthening expectations for a near-term Fed rate hike. Last week, Fed Chair Kevin Warsh said at the Jackson Hole symposium that the central bank would “have work to do” if policymakers were not confident inflation was returning to its 2% target. Markets are currently pricing a 66% probability of a rate hike later this month, according to the CME FedWatch Tool. Attention now turns to the ADP employment report due on Wednesday and nonfarm payrolls on Friday for further clues on the Fed’s policy path.

Gold traded below $4,450 an ounce on Tuesday, hovering near two-week lows as rising oil prices and hawkish remarks from Federal Reserve Chair Kevin Warsh strengthened expectations for a US rate hike this month. Oil prices advanced for a second straight session after US forces struck an island in the Strait of Hormuz, while Iran responded with attacks on the UAE and Jordan. Higher energy costs stoked inflation concerns, strengthening the case for a near-term Fed rate increase, which is typically negative for bullion. Meanwhile, Chair Warsh said the Fed would “have work to do” without clearer evidence that inflation is moving back toward its 2% target. Markets are now pricing in a more than 65% chance of a September hike, up from around 36% before his remarks. Despite the recent decline, gold still gained about 10% in August after the US Treasury announced plans to double liquidity-support buybacks of longer-dated bonds, reviving the so-called debasement trade.

Gold traded around $4,440 an ounce on Monday, near a two-week low, as renewed Middle East tensions fueled inflation concerns while hawkish comments from Federal Reserve Chair Kevin Warsh strengthened expectations for a September rate hike. Bullion fell more than 3% on Friday, its biggest one-day drop since June 10, after Warsh warned the Fed would “have work to do” without clearer evidence that inflation is returning to its 2% target. Markets now price in just over a 60% chance of a September hike, up from about 36% before his remarks, according to the CME FedWatch Tool. Oil prices also jumped after the US said it attacked an Iranian island in the Strait of Hormuz, prompting a response from Tehran. Despite the pullback, gold remains up around 10% this month, its strongest monthly gain since January, after the US Treasury announced plans to double liquidity-support buybacks of longer-dated bonds, stoking concerns over currency debasement.