Gold drops 3% as Fed's Warsh comments lift rate hike bets

ReutersLast Updated: Aug 29, 2026, 09:44:00 AM IST

Synopsis

On Friday, gold prices plummeted by more than three percent due to comments from Federal Reserve Chairman Kevin Warsh regarding inflation. As a result, traders heightened their expectations for a possible interest rate increase in September. Consequently, gold futures closed lower, retreating from their recent peaks, while a stronger dollar made gold less accessible to foreign investors.

Gold prices reversed course and fell over 3% on Friday, as traders increased bets on an interest rate hike after Federal Reserve Chairman Kevin Warsh's remarks on curbing inflationary pressure.

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.

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