4 days ago
Gold Falls After Warsh Speech as Bond Yields Rise
Gold prices dropped after Federal Reserve Chair Kevin Warsh spoke at Jackson Hole.
Investors thought his comments suggested inflation is still a serious problem.
That could mean interest rates stay high or possibly rise before they are cut.
Gold does not pay interest, so investors often prefer bonds and other assets when rates are high.
Higher US Treasury yields also helped strengthen the dollar, putting more pressure on gold.
Gold had briefly climbed after the US Treasury increased its planned purchases of long-term bonds.
However, concerns about US debt and inflation have not disappeared.
Tensions involving Iran, Canada and the Middle East may still make investors want gold for protection.
Analysts will be watching Treasury yields to judge gold’s next move.
Gold prices fell more than 2.5% to about $4,477 after Kevin Warsh’s August 28 Jackson Hole speech.
Gold closed at Rs 1,58,854 on India’s MCX on August 28.
Higher Treasury yields and a stronger US dollar reduced gold’s appeal as a non-yielding asset.
US Treasury buybacks briefly helped gold rise more than $200 to around $4,580.
Persistent inflation, fiscal-debt concerns and geopolitical uncertainty continue to support gold’s role as a hedge.
- Who
- Gold investors, the Federal Reserve, the US Treasury and financial-market participants.
- What
- Gold prices dropped more than 2.5% after Kevin Warsh’s Jackson Hole speech, while Treasury yields and the US dollar strengthened.
- Where
- Jackson Hole, US Treasury markets and India’s MCX.
- When
- August 28; the article also discusses expected rate decisions and market conditions in the following months.
- Why
- Warsh’s emphasis on persistent inflation increased expectations that interest rates could remain high or rise, making non-yielding gold less attractive.
Key facts
- Gold price after speech
- About $4,477, down more than 2.5%.
- India gold price
- Rs 1,58,854 on MCX on August 28.
- 30-year Treasury yield
- Reached 5.33% earlier, a level the article says had not been seen since 2007.
- Gold’s temporary rebound
- Gold rose more than $200 to about $4,580 after the US Treasury announced increased long-term bond buybacks.
- July inflation measure
- The Personal Consumption Expenditures Price Index rose 3.7% over 12 months through July.
- Federal Reserve target
- The article says US consumer-price inflation remains above the Fed’s 2% target.
- US debt
- The article says US fiscal debt has exceeded $40 trillion.
Sources
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