Gold Tumbles Below $4,327 as Warsh's Remarks Spark Interest Rate Fears

Gold prices have been under pressure in September, following their strongest year-to-date gain in August. Spot gold prices fell by more than 2.6% to $4,327 per ounce, their lowest since August 19th. The World Gold Council (WGC) attributes this decline to recent developments that put pressure on gold, including differences in policy direction between the US Treasury Department and the Federal Reserve.

According to WGC, the US Treasury Department tends to favor lower yields, while the Fed prioritizes controlling inflation. This has led to a strong market reaction, with Fed Chairman Kevin Warsh's hawkish remarks at the Jackson Hole conference triggering a sharp rise in yields on 2-year Treasury bonds.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, notes that gold and silver have fallen more than 4% since Warsh's remarks. He attributes this decline to three main channels: expectations of rising short-term interest rates, rising real and nominal yields, and a stronger USD.