The price of 22K gold decreased to Dh493.75 from Dh497, while the price of 24K gold in Dubai fell to Dh533 per gram from Dh536.75 at the previous close. The move comes as global gold markets digest a more hawkish outlook for US interest rates, following Federal Reserve Chairman Kevin Warsh’s assertion that policymakers still have “work to do” to bring inflation back to the central bank’s 2 percent target. Gold has encountered renewed pressure as traders have amplified their expectations for a US rate hike in September in light of Warsh’s remarks. Source reported that traders were pricing in a 58 percent chance of a September rate hike, an increase from 36 percent prior to Warsh’s remarks. Expectations for a December increase have risen to 89 percent, as indicated by the CME FedWatch tool. That is significant for gold, as the precious metal does not yield interest or dividends. When interest rates and bond yields increase, the appeal of holding gold may diminish for investors.

The US dollar has also strengthened, reaching a high not seen in over a week according to the latest update. “Gold is getting slapped hard as Chair Warsh affirms that inflation isn’t meaningfully slowing and the Fed has ‘work to do,’” independent analyst Tai Wong said. Vijay Valecha noted that gold had fallen below $4,600 an ounce prior to Warsh’s speech, with a portion of the decrease linked to profit-taking following bullion’s ascent to a three-month high earlier in the week. He stated that investors were also considering the outlook for US monetary policy as policymakers continued to be divided regarding the suitable trajectory for interest rates. Despite the short-term pullback, Valecha indicated that the overarching outlook continued to be favourable for gold. “Robust investment flows, central-bank accumulation and concerns around U.S. fiscal sustainability continue to underpin the bullish backdrop,” he stated.

Valecha added that gold had retreated from its recent high near 4,696 but remained above the major 4,369 breakout support level. For the near term, he identified $4,650-$4,700 as the immediate resistance zone, while $4,550 was the first intraday support level. A break below that could push prices toward $4,500, he stated. Gold prices have also experienced a decline in India. The 24K rate decreased to Rs 156,760 per 10 grams, down from Rs 158,240, reflecting a reduction of Rs 1,480 per 10 grams. The 22K rate decreased to Rs 143,700 per 10 grams, a decline from Rs 145,050, reflecting a reduction of Rs 1,350. Source also reported that gold discounts in India fell sharply during the week as demand diminished amid market speculation regarding a potential reversal of a recent increase in import duties by the government. The recent downturn follows a period of robust performance for gold.

Valecha noted that the precious metal experienced an increase exceeding 13 percent in August, marking its most robust monthly performance since January and ranking among its most significant monthly gains of this century, as indicated in the provided market commentary. Gold’s longer-term support has been bolstered by a resurgence in demand for physically backed gold exchange-traded funds, ongoing purchases by central banks, and apprehensions regarding the sustainability of US fiscal policies. Source also characterised the market as being positioned between a more dovish US Treasury stance and a more hawkish Federal Reserve. Nicky Shiels characterised the situation as a “tug of war,” noting that the so-called debasement trade may persist into September, potentially offering support for gold.