Fed Hawkishness Sends Gold Prices Plummeting Toward $4,200/Oz

TD Securities' Head of Commodity Research Bart Melek believes that the Federal Reserve's hawkish stance, led by Chairman Kevin Warsh, will drive gold prices downward. In a recent analysis, Melek noted that Warsh's speech at Jackson Hole, Wyoming reiterated the central bank's commitment to keeping inflation under control.

Warsh stated that policymakers need to ensure inflation returns to their 2% target, which is firm and fixed. He also pointed out that financial conditions are not currently restrictive. This hawkish tone sent gold prices down $125, to $4,470/oz at the time of writing.

Melek believes that gold likely has further to fall in the near term, even if the US dollar remains under pressure. The analyst thinks that the Fed's commitment to price stability will tune out debasement-trade narratives for now.

The yellow metal is expected to give up some of its recent gains and fall toward the lower end of the $4,200-$4,700/oz trading range by year-end. Higher interest rates at the front end of the curve should offset any improvement in financial conditions stemming from Treasury Department liquidity operations on the long end of the curve.

Melek predicts that once inflation stabilizes amid a more balanced oil market and weaker aggregate demand due to higher interest rates, the Fed will have greater confidence to unwind any tightening. This could lead to a move toward their Q3 2027 target of $5,350/oz for gold prices.