Gold slips as Fed outlook weighs, but August set for strongest gain since January

Gold prices pulled back on Monday as investors continued to reassess the Federal Reserve’s rate outlook following Chair Kevin Warsh’s hawkish inflation message, while rising oil prices added to inflation concerns.

Despite the latest pullback, gold remains about 10% higher in August and is heading for its strongest monthly gain since January.

As of 08:05 ET (12:05 GMT), XAU/USD rose marginally to $4,458.30 an ounce, while Gold Futures declined 0.4% to $4,509.41. XAG/USD rose 1.5% to $67.37 an ounce, while XPT/USD fell 0,5% to $1,813.69. The US Dollar Index fell 0.2% to 99.5.

Warsh’s inflation stance revives rate hike bets

Gold fell 3.2% on Friday, its biggest daily decline since early June, after Warsh said the Federal Reserve still has work to do to bring inflation back to its 2% target.

His comments pushed investors to raise expectations for another rate increase, with markets now pricing roughly a 57% probability of a September hike, according to CME’s Fedwatch tool. 

That shift is weighing on bullion because gold does not pay interest. When traders expect rates to remain higher, interest-bearing assets such as government bonds become relatively more attractive.

The stronger dollar that followed Warsh’s remarks also tends to pressure gold because the metal becomes more expensive for buyers using other currencies.

ANZ analysts said the latest retreat reflected precisely that shift. They said gold fell sharply after Warsh’s inflation warning increased expectations of rate hikes later this year and reduced investor demand. Still, they expect the downside to remain limited as the debasement trade continues to attract buyers.

The pressure is also coming from energy markets. Brent crude rose to around $91 a barrel on Monday and U.S. crude reached $86.20, after U.S. forces struck Iranian launchers on Larak Island on Sunday.

Iran then attacked U.S. forces stationed in Jordan, according to reports, adding to concerns that the conflict could intensify and keep energy prices elevated. 

Treasury intervention keeps debasement theme alive

Gold’s August rally gained fresh momentum earlier this month after the U.S. Treasury unexpectedly increased its purchases of longer dated government bonds.

The intervention pushed yields lower and weighed on the dollar, while also reviving concerns that rising government debt and efforts to manage borrowing costs could weaken confidence in U.S. assets.

That has brought the debasement trade back into focus. The theme helped drive gold’s roughly 65% rally in 2025, as investors used bullion as a hedge against the risk of widening budget deficits, currency depreciation and declining purchasing power.

ANZ now sees the recent hawkish shift in monetary policy as a risk to that demand, but argues the fiscal and currency concerns that underpin the debasement trade remain in place.

The metal had rebounded sharply from its late June low near $3,942 before Friday’s selloff, while renewed central bank and investor demand had helped push it well above the $4,000 threshold.

Markets will look closely at upcoming U.S. employment and inflation data for evidence that could either reinforce the September hike case or reverse some of the hawkish positioning.