Gold Slumps Amid Hawkish Fed Expectations Outweighing Geopolitical Concerns
The gold market is experiencing a paradoxical situation where it's being impacted more by interest-rate expectations than geopolitical safe-haven demand. The US military strike in the Strait of Hormuz, which typically triggers safe-haven buying, has had little effect on gold prices.
This disconnect can be attributed to the dominance of interest-rate expectations in the precious metals complex. Spot gold has been trading at $4,331.87 per ounce, down 2.7% on the day and 2.9% earlier in the session.
The primary driver of gold's recent weakness is the implied probability of a September rate hike, which has jumped to roughly 65% following Kevin Warsh's hawkish speech at the Jackson Hole symposium. This repricing has diminished the appeal of gold relative to interest-bearing assets.