Gold prices moved lower on Friday after Federal Reserve Chair Kevin Warsh warned that persistent inflation could keep interest rates elevated for longer.
The comments pressured the non-yielding precious metal following its recent rally to a more than three-month high.
Spot gold fell around 0.8% to $4,560.37 an ounce, while US gold futures declined roughly 0.2% to $4,655.41.
Gold Retreats From Three-Month High
Gold had climbed close to $4,700 per ounce earlier in the week, reaching its highest level in more than three months.
Demand was supported by concerns over US fiscal policy and measures from the Treasury aimed at supporting longer-dated bonds.
However, Friday’s decline left gold on track for a modest weekly loss after three consecutive weeks of gains.
Inflation Raises Pressure on the Federal Reserve
Recent inflation data have complicated expectations for easier monetary policy.
The Personal Consumption Expenditures price index, which is closely watched by the Federal Reserve, increased 3.7% year over year in July.
The stronger inflation reading has increased speculation that the Fed could raise interest rates again this year.
According to the CME FedWatch tool, markets were pricing in a 34% probability of a September rate hike and a 74% chance of an increase by December.
Higher Interest Rates Weigh on Gold
Higher interest rates generally create pressure on gold because the precious metal does not generate interest or income.
As yields rise, interest-bearing assets can become more attractive compared with bullion.
Gold had previously benefited from lower bond yields and a weaker US dollar. Both factors reduce the opportunity cost of holding gold while also making the metal more affordable for buyers using other currencies.
Gold Remains Strong Despite Friday’s Decline
Despite the latest pullback, the broader outlook for gold remains relatively supportive.
The precious metal has gained more than 13% during August, reflecting strong demand amid uncertainty over inflation, interest rates and US fiscal policy.
Investors are now likely to focus closely on upcoming economic data and further comments from Federal Reserve officials for clues about the direction of monetary policy.
Silver, Platinum and Copper Also Move Higher
Elsewhere in the precious metals market, silver rose around 2% to $70.67 per ounce, while platinum advanced approximately 2.4% to $1,894.60 per ounce.
Copper prices also moved slightly higher.
Benchmark copper futures on the London Metal Exchange gained around 0.5% to $14,361.15 per ton, while US copper futures increased about 0.1% to $6.62 per pound.
