Gold Price Tumbles After Hawkish Fed Speech
Gold's rapid August rally has come under pressure following a hawkish speech by Federal Reserve Chair Kevin Warsh, which strengthened the U.S. dollar and increased expectations for a September rate hike.
The gold price reversed from near $4,700 to around $4,450 on Friday after Warsh emphasized that the U.S. economy remains strong and underlying inflation is still too high.
Before his speech, markets expected limited guidance on monetary policy, but instead, Warsh's comments reinforced concerns of a prolonged restrictive stance by the Federal Reserve.
This has increased pricing for a September rate hike to approximately 57%, compared with around 33% before Warsh's speech. The stronger dollar and higher interest-rate expectations have put additional pressure on gold as it becomes more expensive for international buyers and its opportunity cost increases.
Despite the latest selloff, gold remains higher for August following a strong rally earlier in the month, but its bullish trend is facing a tougher test as investors reassess the Federal Reserve's next move.