Gold Tumbles on Warsh's Hawkish Stance and Iran Tensions

Gold prices dipped to their lowest in nearly two weeks on Monday after US Federal Reserve Chair Kevin Warsh hinted at interest rate hikes to combat inflation. The Fed's hawkish stance weighed heavily on gold, which has typically lost appeal in a rising interest rate environment.

Spot gold dropped 0.8% to $4,417.04 per ounce by 0406 GMT, marking its weakest level since August 19. US gold futures declined 1.4% to $4,466.80.

The Fed's potential decision to raise interest rates has significant implications for gold investors, said Tim Waterer, chief market analyst at KCM Trade. He noted that gold is often viewed as a hedge against inflation, but it does not yield interest, making it less attractive in a rising rate environment.

Ongoing tensions between the US and Iran also contributed to the decline in gold prices, as oil prices rose more than 2% on Monday following reports of US military action in the region. The Fed will 'have work to do' if policymakers don't get the confidence they need that inflation is heading down to 2%, Warsh said at the Jackson Hole economic symposium.