Gold Prices Plummet Amid Rising Rate Hike Bets

Gold prices have dropped by more than 3% on Friday, the biggest decline since early June, as US Federal Reserve Chairman Kevin Warsh reaffirmed his pledge to fight inflation. This has led traders to price in a more than 50% chance of a rate hike at the Fed's next meeting in September.

Warsh reiterated that the Fed will return inflation to its 2% target, which he described as 'a firm and fixed target'. The hawkish stance by the Federal Reserve is in contrast to the dovish approach taken by the US Treasury, which has been buying back bonds to rein in borrowing costs.

This 'tug of war' between the dovish Treasury and hawkish Fed has supported gold prices, with the metal up around 10% in August. However, the recent decline in gold prices may be short-lived as traders continue to price in a rate hike.