Gold Price Slides Further as Fed Rate Hike Bets Rise

Gold prices extended their decline Monday after suffering their sharpest one-day drop in more than 11 weeks on Friday, as investors reacted to Federal Reserve Chair Kevin Warsh’s warnings over inflation and renewed tensions between the United States and Iran.

Gold futures were trading around $4,475 shortly after 10 a.m. EDT Monday, down more than 1%, after falling earlier to $4,445.60. The metal had already dropped more than 3% on Friday, reversing some of the strong gains recorded throughout August.

Analysts linked the latest weakness partly to comments from Warsh at the Jackson Hole symposium on Friday. Warsh raised concerns about persistent inflation and said the Federal Reserve could have “work to do” if policymakers do not expect inflation to return to its 2% target.

Ole S. Hansen, head of commodity strategy at Saxo Bank, said Monday that gold was trading “sharply lower” after Warsh delivered what he described as a “hawkish” speech. The remarks increased expectations that the central bank could raise interest rates, a development that generally weighs on precious metals.

ActivTrades senior analyst Ricardo Evangelista also attributed part of gold’s decline to Warsh’s comments, while pointing to the renewed U.S.-Iran confrontation. He said the tensions were increasing inflation concerns and strengthening expectations for a Federal Reserve rate increase before the end of the year.

The United States and Iran exchanged strikes Sunday for the first time in several weeks, sending oil prices higher. Oil and precious metals have generally moved in opposite directions during the Iran war, adding another source of pressure to gold.

Silver has also weakened. Silver futures were around $66 an ounce shortly after 10 a.m. EDT Monday, down roughly 1%, following a larger decline late last week. The metal had been trading near $71 before falling after Warsh’s Jackson Hole remarks.

Gold had enjoyed a strong August before last week’s reversal, breaking out of a largely stagnant summer period. Earlier in the month, the Treasury Department announced plans to increase buybacks of long-dated government debt, a move analysts credited with supporting gold prices. The metal also climbed to a 15-week high last week, with analysts pointing to weakness in the U.S. dollar as another factor behind the rally.

Expectations for a Federal Reserve rate increase have risen sharply since Warsh’s speech. CME Group’s FedWatch tool puts the probability of a September rate hike at 63.9%, compared with roughly 36% before his remarks. The probability is higher for later meetings, reaching 72.9% for October and 87.7% for December.

Several economic reports due this week could influence precious-metals prices. The ADP employment report is scheduled for Wednesday, followed by the Bureau of Labor Statistics’ monthly jobs report on Friday.

Gold and silver have pulled back from record levels reached earlier this year after a months-long rally. The metals benefited from international tensions, interest-rate cuts, demand from technology industries and President Donald Trump’s tariffs. Gold reached $5,600 in January, while silver climbed to $121. Prices then plunged late that month after Trump selected Warsh to lead the Federal Reserve, with analysts viewing him as relatively hawkish on monetary policy. Gold and silver have generally remained under pressure throughout the Iran war.