Gold Slips Despite Strongest Monthly Gain Since January

Gold prices moved lower on Monday as investors reassessed the Federal Reserve’s interest rate outlook following hawkish comments from Chair Kevin Warsh.

Rising oil prices also added to inflation concerns, creating additional pressure on precious metals.

Despite the latest decline, gold remains around 10% higher in August and is on track for its strongest monthly performance since January.

Gold Prices Pull Back After Strong August Rally

At 08:05 ET, XAU/USD traded near $4,458.30 an ounce, while gold futures fell 0.4% to around $4,509.41.

Silver prices gained 1.5% to $67.37 an ounce, while platinum slipped 0.5% to $1,813.69.

Meanwhile, the U.S. Dollar Index fell 0.2% to approximately 99.5.

Warsh’s Hawkish Tone Revives Fed Rate Hike Bets

Gold suffered a sharp 3.2% decline on Friday, marking its biggest daily drop since early June.

The selloff followed comments from Federal Reserve Chair Kevin Warsh, who said policymakers still have more work to do to bring inflation back toward the Fed’s 2% target.

His remarks caused traders to increase expectations for another interest rate hike.

According to CME FedWatch data, markets are now pricing in roughly a 57% probability of a September rate increase.

Higher Interest Rates Pressure Gold

Expectations for higher interest rates can weigh on gold because the precious metal does not generate interest or yield.

When bond yields rise, interest-bearing assets such as U.S. government debt can become more attractive compared with bullion.

A stronger U.S. dollar can also create pressure on gold by making the metal more expensive for investors using other currencies.

ANZ analysts said the recent retreat reflects this shift in expectations. However, they also believe downside risks could remain limited as longer-term demand linked to currency debasement continues.

Oil Surge Adds to Inflation Concerns

Energy markets are also adding pressure to the inflation outlook.

Brent crude climbed to around $91 per barrel on Monday, while U.S. crude rose to approximately $86.20.

Oil prices moved higher after U.S. forces struck Iranian launchers on Larak Island on Sunday.

Iran later responded with attacks against U.S. forces stationed in Jordan, increasing fears that the conflict could escalate further.

A prolonged rise in oil prices could strengthen inflationary pressures and make it more difficult for central banks to ease monetary policy.

Treasury Intervention Supports the Gold Debasement Trade

Gold’s strong August performance gained additional momentum earlier in the month after the U.S. Treasury increased purchases of longer-dated government bonds.

That intervention pushed yields lower and weakened the dollar.

It also renewed concerns about government debt, borrowing costs, and the long-term purchasing power of the U.S. currency.

These factors have brought the so-called debasement trade back into focus.

Gold Remains Supported by Fiscal Concerns

The debasement theme played an important role in gold’s roughly 65% rally during 2025.

Investors increasingly used bullion as a hedge against rising government deficits, currency depreciation, and declining purchasing power.

ANZ believes the Federal Reserve’s more hawkish stance could temporarily weaken that demand.

However, the fiscal and currency concerns supporting the broader gold investment case remain in place.

U.S. Economic Data Could Drive Gold’s Next Move

Gold had rebounded strongly from its late-June low near $3,942 before Friday’s sharp selloff.

Renewed central bank and investor demand also helped push the metal well above the $4,000 level.

Markets will now focus on upcoming U.S. employment and inflation data.

Strong economic figures could reinforce expectations for a September Fed rate hike and place further pressure on gold.

Softer data, however, could reduce rate hike expectations and potentially support another move higher in bullion prices.