Gold Falls After Warsh's Hawkish Jackson Hole Speech

Gold has taken a hit after Kevin Warsh's speech at Jackson Hole, with its price currently trading in the $4,426 to $4,441 range. The sharp selloff occurred post-Jackson Hole, and gold broke its trendline, making $4,408 the new support level. This shift in the narrative comes as investors price in a more than 57% chance of a September rate hike following Warsh's speech.

The dollar strengthened, and the short-end of the yield curve steepened after Warsh argued that confidence in the policy goal of low inflation is critical, and more action is justified if confidence in policy is not assured. He described an economy that is strong, with solid profitability, significant investment, and low unemployment.

The chance of a September rate hike by the Fed climbed to about 57 percent, erasing much of the dovish repricing that kept gold buoyed in the preceding month. The two-year Treasury yield hit 4.33 percent, creating a higher opportunity cost for owning gold as yields increase and drawing investment as traders follow expectations of where yields will move next.

Despite the selloff, strong institutional demand continues to exist beneath the surface, with global ETFs for physically backed gold attracting significant inflows. Gold holdings increased by 23 tonnes to 4,068 tonnes, and assets under management totaled around $530 billion.