Gold Steadies as Hawkish Fed Bets Revive Rate Hike Expectations
Gold prices stabilized on Monday after plummeting over 3% in the previous session, as investors reassessed their expectations for Federal Reserve rate hikes.
The Fed's hawkish stance was reinforced by Chair Kevin Warsh's comments that the central bank still has work to do to bring inflation back to its 2% target. This shifted investor expectations towards a rate hike in September, with markets now pricing roughly a 57% probability of such an event, according to Reuters.
As interest-bearing assets like government bonds become more attractive when rates are expected to remain higher, gold suffered as a result. The stronger dollar that followed Warsh's remarks also pressured the metal, making it more expensive for buyers using other currencies.
Despite this, analysts at ANZ expect the downside for gold to remain limited due to ongoing concerns about debasement, which have driven the metal's roughly 65% rally in 2025. These concerns include rising government debt and efforts to manage borrowing costs, which could weaken confidence in U.S. assets.