Gold's Summer Rally Hits Roadblock Amid Fed Hawkishness and Geopolitical Tensions

Gold's price has declined for four consecutive sessions, extending its weekly loss to 6.3%. The metal had reached $4,700 earlier in August but dropped to $4,308.39 per ounce on Wednesday.

The decline was triggered by a speech from Fed Chair Kevin Warsh on August 28, which poured cold water on hopes for imminent easing and signaled that the central bank still has 'work to do' until inflation reaches its 2% target.

Markets took the message to heart, with traders pricing a 66.4% probability of a 25-basis-point rate hike in September, against just 33.6% for a pause.

The sell-off was unexpected, as bullion investors would typically seek safe-haven buying during geopolitical tensions. However, the escalation of US-Iranian relations actually lifted oil prices and sharpened inflation concerns, reinforcing expectations of tighter Fed policy.