Gold drops 3% as Fed’s Warsh comments lift rate hike bets
Spot gold was down 2.9% at $4,567.23 per ounce by 01:44 p.m. EDT (1744 GMT), its lowest level since August 20. U.S. gold futures for December delivery settled 2.9% lower at $4,529.9.
Bullion has fallen 2.9% this week after today’s decline, pulling back from the more than three-month high of $4,696.18 reached on Tuesday.
“Gold is getting slapped hard as Chair Warsh affirms that inflation isn’t meaningfully slowing and the Fed has ‘work to do.’ While it may once again be ‘speak loudly and carry a short stick’ this will make the market price the September meeting as a coin flip,” independent analyst Tai Wong said.
Traders added to bets on a September rate hike after Warsh said the Fed will “have work to do” if policymakers are not confident that underlying inflation is returning to its 2% target, marking the closest he has come to acknowledging interest rate hikes may be needed to ease price pressures.
Traders now see a 58% chance of a U.S. rate hike in September, compared with 36% before Warsh’s comments, and an 89% chance of a December increase, according to the CME FedWatch tool.
Gold tends to lose appeal in a high interest rate environment as it offers no yield.The dollar rose to a over one-week high, making greenback-priced bullion more expensive for holders of other currencies. [USD/]
Gold discounts in India plunged this week, as demand fell sharply on market speculation that the government could consider rolling back a recent hike in import duties. [GOL/AS]
Spot silver fell 3.5% to $66.81 per ounce, platinum was down 0.6% at $1,835.07, while palladium gained 5.3% to $1,422.25 an ounce.
