Gold ETF Slumps as Hawkish Fed Signals Rate Hike Looms
The SPDR Gold Shares ETF has been sliding in pre-market trading, down 1.6% to $401.75, following a sharp multi-session selloff triggered by Federal Reserve Chair Kevin Warsh's hawkish remarks at the Jackson Hole symposium on Friday.
Warsh warned that inflation is not meaningfully slowing and that the central bank may have 'work to do' before price stability is restored, sending gold tumbling more than 3% on Friday, its largest single-day drop in over 11 weeks.
The probability of a September rate hike has risen above 64%, up from roughly 36% before Warsh spoke. This hawkish pivot by the Fed has created a bearish backdrop for gold, with renewed US military action targeting Iranian positions in the Strait of Hormuz sending oil prices surging above $90 per barrel.
The combination of geopolitical risk, rising real yields, and a firmer dollar is creating a double bind for gold. The precious metal's price has been further suppressed by sustained ETF outflows, with global gold demand in Q2 already at its weakest level since mid-2021.