Gold Prices Rebound as Hawkish Fed Bets Weigh on Bullion
Gold prices edged higher on Monday after falling over 3% in the previous session, as investors reassessed the Federal Reserve's rate outlook following Chair Kevin Warsh's hawkish inflation message.
Rising oil prices added to concerns, but the broader fiscal backdrop behind gold's August rally continues to offer some support. Gold remains about 10% higher in August and is heading for its strongest monthly gain since January.
Warsh's comments pushed investors to raise expectations for another rate increase, with markets now pricing roughly a 57% probability of a September hike according to CME's Fedwatch tool. This shift weighs on bullion because gold does not pay interest, making interest-bearing assets such as government bonds relatively more attractive.
The stronger dollar that followed Warsh's remarks also tends to pressure gold, as the metal becomes more expensive for buyers using other currencies. ANZ analysts expect the downside to remain limited as the debasement trade continues to attract buyers.