Gold Prices Plummet Nearly 9% Amid Hawkish Fed Tone

Gold and silver prices have been under pressure since last Friday's Jackson Hole event, where Fed Chair Kevin Warsh emphasized his focus on fighting inflation. As a result, spot gold has slipped from its three-month high of $4,697 to below $4,300, a decline of nearly 9%. The hawkish tone was reinforced by Fed Governors' comments warning that persistent inflation may require further rate hikes.

The recent sharp correction in prices has already priced in a significant part of the hawkish shift. However, if the US labour market remains weak or inflation softens, it could quickly reverse rate expectations and support a recovery in bullion. Technical analysis suggests that gold is currently hovering near its key pivot level of $4,300/oz, with potential targets at $4,200-$4,220 or $4,450-$4,580.

Vedika Narvekar, Research Analyst - Commodities & Currencies at Anand Rathi Shares and Stock Brokers, maintains a bearish outlook for gold in the near term. Key drivers include higher rate-hike expectations, rising US Treasury yields, and a stronger dollar. Nevertheless, fundamental analysis indicates that a weaker US labour market or softer inflation could quickly reverse these trends.