Gold Prices Plummet Amid Rising Bets on US Rate Hike

The price of gold plummeted by its largest drop in over two months on August 31, as bets on a potential interest rate hike by the US Federal Reserve reached their highest level since early June. The Fed's commitment to fighting inflation was reaffirmed by Chairman Kevin Warsh at the annual conference in Jackson Hole, Wyoming.

Warsh reiterated that policymakers will return inflation to their 2% goal, which he emphasized is a 'firm and fixed target'. As a result, traders are now pricing in over a 50% chance of a hike at the Fed's next meeting in September.

Nicky Shiels, head of research and metals strategy at MKS PAMP SA, noted that the dovish Treasury and hawkish Federal Reserve are in a 'tug of war'. Despite this, she predicted that the debasement trade will continue into September, as the US Treasury starts bond buybacks.