Gold drops as Fed's Warsh comments lift rate hike bets - CNBC

AI desk brief

Gold reversed sharply lower as traders repriced the Fed path after Kevin Warsh’s comments on inflation, with spot gold down 2.75% at $4,474.45/oz and December U.S. gold futures off 3.0% to $4,524.10/oz. The move came alongside a stronger dollar and a jump in September hike odds, which rose to 56% from 36% after the remarks, while December hike odds climbed to 80% according to CME FedWatch.

Independent analyst Tai Wong said gold was being “slapped hard” as the market interpreted Warsh as signaling the Fed still has work to do on inflation. Warsh’s comment that policymakers may need to act if underlying inflation is not convincingly returning to 2% was taken as a clear hawkish lean, even if not an explicit rate-hike commitment. That hawkish repricing hit a metal that had just printed a more than three-month high of $4,696.18 on Tuesday.

Near term, the key driver is whether Friday’s move is the start of a deeper correction or just a positioning flush after the recent run-up. Gold remains vulnerable if U.S. real yields and the dollar continue to firm, but the market is now highly sensitive to any reversal in Fed messaging or softer inflation data. The next catalyst is the September policy meeting, with traders now pricing it as essentially a coin flip.