Gold Prices Stabilize Amid Hawkish Fed Remarks and Rising Oil
Gold prices stabilized around $4,460 an ounce on Monday after plummeting over 3% in the previous session. The precious metal's decline was triggered by hawkish remarks from Federal Reserve Chair Kevin Warsh, who revived expectations for a September interest rate hike.
In his Jackson Hole address on Friday, Warsh emphasized that inflation is not easing significantly and reaffirmed the central bank's commitment to bringing inflation back to its 2% target. He also noted that financial conditions are not currently restrictive, further solidifying the case for a rate increase.
As a result, markets are now pricing in around a 57% chance of a 25-basis-point Fed rate hike in September, up sharply from roughly 40% a week earlier. This increased likelihood of a rate hike put additional pressure on gold prices, which have been struggling amidst rising oil prices.
The US military's targeting of Iranian rocket launchers preparing to deploy mines into the Strait of Hormuz added to the upward pressure on oil prices and further weighed on gold. However, despite this decline, gold remains on track to gain over 10% for August, largely driven by the so-called debasement trade.