Gold Tumbles on Warsh's Hawkish Stance and Escalating Middle East Tensions
Gold prices hit their lowest in nearly two weeks on Monday after US Federal Reserve Chair Kevin Warsh signaled that interest rate hikes may be necessary to combat inflation. Spot gold fell by 0.3% to $4,439.31 per ounce as of 0643 GMT.
The decline was attributed to the hawkish tone struck by Warsh at the Jackson Hole economic symposium, where he hinted that policymakers might need to raise interest rates if they don't see confidence that inflation is headed towards 2%. This sentiment has already sparked a 60% chance of a Fed rate hike in September, according to the CME FedWatch tool.
Meanwhile, escalating Middle East tensions have fueled concerns about oil prices, with US military action in Iran contributing to upward pressure on crude. Oil prices rose over 2% as a result, further weighing on gold's appeal as an inflation hedge.
Tim Waterer, chief market analyst at KCM Trade, noted that 'gold is still licking its wounds' from Warsh's comments and that 'NFP has the potential to either extend gold's post-Jackson Hole softness or provide the catalyst for a short-covering bounce.'