Gold Prices Plummet as Fed Chief's Hawkish Tone Shifts Market Sentiment
The gold price took an unexpected dive on Monday morning, plummeting by over 4% to 954.3 yuan per gram after a speech by Federal Reserve Chair, Wash. This sudden drop came despite the gold price reaching its highest level in August, surging by 15% in just one month.
The rally in gold prices was driven by expectations of US dollar credit risks, but Wash's speech changed everything. He explicitly stated that the 2% inflation target is 'firm and fixed' and that if inflation doesn't fall back fast enough, the Fed 'still has work to do'. This hawkish tone sent interest rate expectations soaring, causing gold prices to plummet.
The drop was not just limited to spot gold, as silver also fell by over 4%. The Asia-Pacific market was already off the market at the time of Wash's speech, leading to a vicious cycle of falling prices and more selling. This sharp drop erased nearly 40% of the August rally in two days.