Warsh's Hawkish Speech Sparks Dollar Rally, Gold Sell-Off
The Fed Chair Kevin Warsh's speech at the Jackson Hole summit was deemed hawkish, causing the dollar to surge across the board and gold and silver to drop. The probability of a September rate hike jumped from 30% to around 50%. The market had been expecting a dovish tone, but Warsh emphasized that inflation remains the clear priority and that underlying inflation is moving towards the Fed's objective.
The short squeeze rally for the dollar triggered a sell-off in gold and silver, with the metal now below its 200-day moving average. Key support levels are around 4436 and then 4400. The S&P 500 also turned negative on the day, finding resistance at the 7770/2 area.
The upcoming jobs and CPI reports will be closely watched before the Fed meets on September 16. A weak report could seriously dent expectations of a September rate hike from the Fed. The Reserve Bank of New Zealand is expected to raise interest rates by another 25 basis points, while the Bank of Canada is likely to keep its rates unchanged.