Warsh's Inflation Warning Sends Gold Prices Plummeting

Gold prices plummeted on Friday, shedding over 3% of their value at one point, after Federal Reserve Chairman Kevin Warsh cautioned that inflation is not slowing significantly. In his first major address since taking over the central bank in May, Warsh emphasized that the 2% inflation goal remains a 'firm and fixed' target.

The dollar surged on the remarks, which traders interpreted as keeping a September rate hike in play. Higher interest rates typically have a negative impact on gold, which earns no interest. Comex gold for December delivery fell to $4,515.30 an ounce, down 3.2% from its overnight high of $4,688.

The decline comes at the end of a strong month for gold, with bullion-backed ETFs adding significant amounts of gold last week and the December contract trading above $4,700 earlier this week. Despite Friday's slide, gold is on track to finish August up about 11%, its best month since January.