Warsh's Comments Spark Gold Price Plunge and Rate Hike Bets

Gold prices plummeted over 1% on Friday after Federal Reserve Chairman Kevin Warsh's comments hinted at an interest rate hike to curb inflation. Spot gold fell to $4,563.05 per ounce by 1452 GMT, while U.S. gold futures for December delivery dropped 1% to $4,615.10.

The market interpreted Warsh's remarks as a signal that the Fed will take action if policymakers are not confident that underlying inflation is returning to its 2% target. This led traders to increase their bets on a September rate hike, with the CME FedWatch tool showing a 56% chance of an increase, up from 36% before Warsh's comments.

The dollar rose to a one-week high, making greenback-priced bullion more expensive for holders of other currencies. Gold tends to lose appeal in a high-interest rate environment as it offers no yield.