Gold drifts lower below $4,450 as hawkish Warsh remarks lift Fed hike bets

Gold price (XAU/USD) attracts some sellers to near $4,445 during the early Asian trading hours on Monday. The precious metal edges lower on a surprisingly hawkish speech by Federal Reserve (Fed) Chairman Kevin Warsh at the Jackson Hole economic symposium. 

The Fed Chairman warned on Friday that inflation is not slowing significantly and that unless policymakers become confident it is, the central bank has “work to do.” Traders raise their bets on a September rate hike following Warsh’s speech, marking the closest he has come to acknowledging interest rate hikes ‌may be needed to ease price pressures.

Markets now ‌see a 56.9% probability of a US rate hike in September, compared to 39.9% before Warsh’s comments, and an 88.7% odds of a December increase, according to the CME FedWatch tool. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.

“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.

Meanwhile, ongoing tensions in the Middle East could raise oil-driven inflation concerns, weighing on the yellow metal. Bloomberg reported on Sunday that the US military struck Iranian rocket launchers that were preparing to send mines into the Strait of Hormuz, following weeks of relative calm. The attack by the US was the first military action against Iran in more than a month, as US President Donald Trump has switched to a campaign to squeeze Tehran’s economy.

Gold sentiment seen resilient even if Fed tone turns more hawkish

According to TD Securities, a shift in tone from Fed Chair Warsh could test the recent optimism in precious metals, but is unlikely to fully derail it. The bank argues that “a more hawkish tone from Fed Chair Warsh would be a catalyst for some reversal in the yellow metal,” yet stresses that “the bar is likely high to reverse the improved sentiment in precious metals,” with positioning and underlying narratives still broadly supportive.

Warsh flags unfinished inflation work as financial conditions stay loose

Fed Chair Warsh delivered a notably more hawkish-leaning message, with an FXS Speechtracker score of 7.4 versus a 6.5 historical average, underscoring that the Fed must be confident underlying inflation is moving to target or “we have work to do.” Warsh highlighted healthy consumer spending, stable labor markets, and rapid business investment alongside “hard-pressed” characterizations of financial conditions as restrictive, while stressing that better summer inflation prints do not yet signal a meaningful shift in underlying trends and that the predominant focus must remain on prices. The emphasis on a firm 2% PCE target, durable-yet-fragile inflation expectations, and limited signs of policy restraint in credit and loan markets reinforces a bias toward keeping policy tight for longer, a backdrop typically supportive of the Dollar against lower-yielding peers.

The FXS Fed Sentiment Index was unchanged on the day, moving 0.00 points to hold at a still-elevated 129.70, firmly in hawkish territory despite the lack of incremental shift. The combination of a stable but high index reading and an above-baseline FXS Speechtracker score signals that Fed communication continues to lean hawkish overall, maintaining support for the Dollar while keeping markets sensitive to incoming inflation data and expectations.

Technical Analysis: Gold price is well-supported above the 100-day SMA

In the daily chart, XAU/USD holds a bullish near-term bias as price remains above both the 100-day simple moving average (SMA) and the 20-day Bollinger middle band, suggesting a well-supported uptrend despite the recent consolidation. The Relative Strength Index (RSI) at 54 keeps momentum in mildly positive territory, hinting that buyers still have the upper hand but without overbought conditions.

On the topside, immediate resistance emerges at the 20-day Bollinger upper band near $4,725, where a sustained break would open the way to fresh record highs. On the downside, initial support is seen around the current area and the Bollinger middle band at $4,430, followed by the 100-day SMA at $4,370; a deeper pullback could extend toward the Bollinger lower band at $4,135, where buyers would be expected to reappear.