Warsh's Hawkish Speech Sparks Gold Price Drop and Rate Hike Expectations
Gold prices slipped by about 3% on Friday after Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Economic Policy Symposium was seen as hawkish, prompting traders to increase their expectations for a central bank rate hike in September.
The dollar strengthened following Warsh's address, with bullion losing ground amid a nearly 1% advance in the dollar. This rally had been driven by the so-called debasement trade amid a steep sell-off in U.S. Treasury bonds.
At 16:00 ET (20:00 GMT), gold declined 3.2% to $4,456.20/oz, while silver lost 3.4% to $4,506.66/oz. The former was down 3.2% for the week, while the latter had slipped 3.8%.
Warsh's speech brought September rate hike back on the table, with traders raising their expectations for a quarter-point hike by the FOMC in September. As per the CME FedWatch tool, the odds of such a hike now stood at more than 57%, up from about 35% the previous day.