Warsh's Jackson Hole Speech Sends Gold Prices Plummeting $70

Gold prices plummeted by $70 in just 10 minutes on Friday after US Fed Chairman Kevin Warsh hinted at tighter monetary policy to curb inflation in his speech at the Jackson Hole central banks' symposium.

Warsh stated that the Fed's price-stability objective of 2% PCE inflation is a 'firm, fixed target', and that it is the Fed's job to deliver stable prices. This stance was seen as a departure from his previous suggestion in late-June that the US central bank should change the inflation data it tracks.

PCE inflation last month ran at 3.7% per year, more than 1.4 percentage points above the 'trimmed mean CPI', which Warsh had been thought to favour. This means that PCE inflation has outrun the overnight cost of Dollars for 4 months running, a phenomenon seen almost 60% of the time since 2000.

The odds of a rate-rise at next month's Fed meeting jumped from 1-in-3 to more than 2-in-5 as traders read and heard Warsh's speech. Year-end expectations also jumped, with the market consensus forecasting a Fed Funds rate of 3.94% after the central bank's December meeting.