Gold Cracks Under Fed Hawkishness, Falls to $4,429.80
Gold's recent rally came to an end as Fed Chair Kevin Warsh hinted at a possible rate hike, sending shockwaves through the market. In his speech at the Kansas City Fed symposium in Jackson Hole on August 28, Warsh stated that policymakers must be confident inflation is moving towards the 2% target 'clearly and at sufficient speed.' If not, he said, 'we have work to do.'
The market had been leaning the other way, treating gold as a safe-haven asset against inflation, debt, and political pressure on the Fed. But Warsh's words changed everything, causing gold prices to fall 1.4% on September 4 to $4,429.80 an ounce.
Gold futures for September delivery fell by 3.3% over two weeks, the largest decline since June. The two-week drop was a warning sign that investors who bought gold as a hedge against fiscal stress and dollar doubts may be in for a disappointment.
The market had been expecting rate cuts, but the strong August jobs report with 162,000 new jobs added to the economy shifted expectations towards a rate hike. With inflation above target, the Fed's hawkish stance is putting pressure on gold prices.