Warsh Hawkish Tone Lifts Rate Hike Bets, Weighing on Gold Prices

Gold prices pulled back on Monday as Federal Reserve Chair Kevin Warsh delivered a hawkish tone at the Jackson Hole economic symposium, lifting rate hike bets and weighing on gold.

Warsh's remarks emphasized that inflation has not been slowing in a meaningful way, prompting market participants to increase wagers on further interest rate hikes. The CME FedWatch tool showed traders now assign a 56.9% chance to a Federal Reserve rate increase in September, up from 39.9% prior to Warsh's speech.

The hawkish tone from Warsh also failed to provide meaningful support for gold prices, despite geopolitical risks in the Middle East. US military strikes on Iranian rocket launchers did not stoke concerns about oil-driven inflation and interact with the outlook for monetary policy and gold's role as an inflation hedge.