WASHINGTON: Gold has declined, after falling more than 3% last Friday, as Federal Reserve (Fed) chairman Kevin Warsh’s pledge to fight inflation lifted bets the US central bank will raise interest rates before the end of the year.
Bullion slid as much as 1.2% to trade at US$4,400 an ounce, after tumbling the most since early June in the previous session.
Traders are now pricing in a more than 50% chance of a hike at the Fed’s next meeting in September.
“The move toward a more hawkish stance was surprising to many investors”, so some short-term headwinds on gold should continue, said Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA.
He expects prices to sit around US$4,200 to US$4,300 an ounce in the near term.
A jump in oil prices added inflationary pressure, after the US military struck Iranian rocket launchers it said were preparing to send mines into the waterway.
It was the first US military action against Iran in more than a month, after President Donald Trump had switched to a campaign of squeezing the republic economically.
Bullion is up around 10% in August, heading for the biggest monthly gain since January, with prices surging after the US Treasury’s surprise announcement mid-month to ramp up bond buybacks. The intervention to rein in borrowing costs revived the so-called debasement trade, driven by concerns over rising sovereign debt and currency devaluation, a theme that helped fuel gold’s 65% rally in 2025.
The dovish Treasury and hawkish Fed are in a “tug of war”, Nicky Shiels, head of research and metals strategy at MKS PAMP SA, said in a note.
The debasement trade is likely to continue into September as the Treasury starts bond buybacks and ahead of the Fed meeting, which will support gold, she added. — Bloomberg
