Warsh's Hawkish Comments Spark Rate Hike Odds and Gold Sell-Off

The US Federal Reserve's hawkish stance has sent shockwaves through financial markets, with interest rate hike odds now above 60% in September. According to CME FedWatch data, traders put the probability of a 25-basis-point hike at the Fed's September FOMC meeting at 63%, up from 57% just two days ago.

This shift in rate expectations was driven by Federal Reserve Chair Kevin Warsh's comments at the Jackson Hole symposium, where he emphasized curbing inflation and signaled a continued tightening bias. Markets rapidly repriced the likelihood of further Fed rate increases, with Deutsche Bank maintaining its forecast for two hikes in September and December.

The prospect of tighter monetary policy has weighed heavily on gold prices, which had surged sharply in recent weeks. Gold tumbled as much as 1.2% intraday, touching a low of $4,400 per ounce, before recovering to $4,422.75. Despite the pullback, gold is still up about 10% in August, putting it on track for its strongest monthly performance since January.