Gold Price Falls 2.8% as Fed Hawkishness Overwhelms Geopolitical Tensions

The price of gold has been plummeting in recent days, falling by 2.8% on Tuesday to $4,328.81 per ounce and extending a pullback that began after Federal Reserve Chair Kevin Warsh's hawkish address at the Jackson Hole symposium on August 28.

The speech, which signaled the central bank still has 'work to do' before inflation convincingly returns to its 2% target, triggered the metal's steepest single-day decline since June 10, with losses exceeding 3%. The market's reaction was swift and measurable, with CME FedWatch data showing traders repricing the odds of a 25-basis-point rate hike in September to 66.4%, up sharply against a 33.6% probability of a pause.

What makes the sell-off particularly notable is what failed to stop it: an American airstrike on an Iranian island in the Strait of Hormuz, followed by Iranian retaliatory strikes against the United Arab Emirates and Jordan, would ordinarily send investors scurrying toward bullion. Instead, the escalation actually compounded gold's problems.

Despite this, analysts point out that the pullback looks far less alarming when placed against the broader trajectory. August still closed with a gain exceeding 10%, and the 30-day picture shows gold up 6.7%. On a year-over-year basis, the metal remains 23% higher, and it still trades roughly 25% above its 52-week low of $3,470.21.

The persistent, structural demand from official institutions is also providing a price floor beneath the market. Central banks purchased a net 289 tonnes of gold in the second quarter, and for 2025 as a whole, central bank buying reached 863.3 tonnes, representing 17.3% of total global demand.