Gold Falls Below $4,440 Amid Rising Rate Hike Odds and Stronger Dollar

Gold prices continued their decline on September 1, falling below $4,440 per ounce. The drop reflects growing investor caution as the Federal Reserve signals a potentially more aggressive stance on interest rates.

The primary catalyst behind gold's recent slide is the hawkish tone of Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium on August 28. He emphasized that inflation remains stubbornly above the Fed's 2% target and that 'there is still work to do,' implying further rate hikes are likely if inflation data does not improve.

This hawkish tone sharply increased market expectations for a 25-basis-point rate hike at the September FOMC meeting, with probabilities jumping to between 57% and 66%, up from around 36-40% just a week earlier. The repricing of Fed policy tightened financial conditions, pushing US Treasury yields higher.

A stronger dollar also adds to gold's headwinds. Alongside rising yields, the US dollar index surged nearly 1% on August 28. A stronger dollar makes gold more expensive for holders of other currencies, dampening demand from international buyers.