Gold slides as Warsh’s hawkish remarks lift September rate-hike odds

Gold prices fell toward $4,560 an ounce on Friday, their lowest level in a week, as investors digested what was perceived as hawkish commentary from Federal Reserve Chair Kevin Warsh.

In his first major speech since becoming chair in May, Warsh warned that inflation is not meaningfully slowing and said policymakers need to be confident that underlying price pressures are easing; otherwise, the central bank still has “work to do.” He reiterated that the Fed remains committed to returning inflation to its 2% goal, which he described as a “firm and fixed” target, and said financial conditions are not currently restrictive.

His closely watched remarks provided greater clarity on his economic and policy views after criticism that his more limited communication strategy had left markets with little guidance on the near-term outlook.

Markets responded by raising the probability of a September rate hike to near 50%, according to CME FedWatch.