Gold Pulls Back as Hawkish Fed Signals Lift Yields

Gold briefly climbed to $4,696.18/oz, its highest level since mid-May, as falling oil prices and efforts to contain the rise in long-term U.S. Treasury yields supported the precious metal.

The rally quickly reversed after Fed Chair Kevin Warsh struck a hawkish tone at Jackson Hole, stressing that inflation remains well above the Fed’s 2% target.

Markets subsequently raised the probability of a September rate hike to around 60%, sending U.S. Treasury yields and the dollar higher.

Spot gold dropped 2.9% to $4,567.23, while silver fell 3.5%. The U.S. Dollar Index gained 0.61%, and the 2-year, 10-year and 30-year Treasury yields climbed to 4.36%, 4.73% and 5.22%, respectively.

The message for gold traders is clear: Fed expectations remain a key driver.

If inflation stays sticky and yields continue rising, gold could face further pressure. A renewed slowdown in inflation, however, could quickly revive expectations for easier Fed policy and provide support for precious metals.