- Gold prices fell more than 3% on Friday, continuing a downward trend into Tuesday where it declined 1.6% to $4,379.84 an ounce, with futures down 1.2% to $4,430.26.
- The odds of a Federal Reserve rate hike have risen to near 70% for the September meeting, up from about one in three prior to Federal Reserve Chair Kevin Warsh's speech.
- Gold tested a key level of $4,350, as noted by strategist Phil Streible, who indicated that a close below this level would change his outlook on gold.
- Gold rallied nearly 10% in a month following the U.S. Treasury's increased purchases of longer-dated government debt, reaching a high near $4,697 last week.
- Federal Reserve Chair Kevin Warsh signaled a commitment to the 2% inflation target during his speech at Jackson Hole, which contributed to the recent volatility in gold prices.
Gold prices have dropped significantly, falling around $320 from last week's peak of $4,697, as oil prices surged past $92 a barrel amid escalating tensions in the Middle East. This decline coincides with a sharp rise in Treasury yields, which have reached 4.78%, the highest since early 2025.12
The market is reacting to comments from Federal Reserve Chair Kevin Warsh, who emphasized the need to control inflation, leading to a 70% probability of a 25 basis point hike at the upcoming Fed meeting. This is a significant increase from a 40% chance prior to Warsh's remarks at Jackson Hole.7
Phil Streible, chief market strategist at Blue Line Futures, indicated that a close below $4,350 could trigger further declines in gold prices. He stated, “That’s where you gave back everything in August on that breakout.” He also noted that the current sell-off may be a correction following a substantial $600 run-up in prices.
Streible warned that raising rates could be a policy mistake, stating, “Rate hikes, they're designed to cripple the demand, but they don't manufacture more oil or wheat.” He believes that the Fed may need to reverse course if they act too soon.
As the market grapples with these dynamics, investors are closely monitoring gold's performance against the backdrop of rising energy prices and potential monetary policy shifts.
“Gold has fallen about $320 from last week's high near $4,697, with the latest leg lower driven by oil above $92 a barrel and the 10-year Treasury yield climbing to around 4.78%. Strategist Phil Streible said a close below $4,350 would change his mind, calling it the line in the sand.”
KITCO
