Gold steadied after tumbling more than 3% on Friday as investors reassessed the outlook for US interest rates following comments from Federal Reserve Chair Kevin Warsh.
The remarks strengthened expectations that the Fed could raise rates to keep inflation in check, putting fresh pressure on gold, which does not pay interest. Higher borrowing costs also tend to support the US dollar, making bullion more expensive for buyers using other currencies.
The retreat came after gold had rallied strongly, prompting investors to scale back bets on easier US monetary policy. As expectations for rate cuts weakened, rising Treasury yields and a firmer dollar added to the pressure on the precious metal.
Bloomberg reported that Warsh’s comments had led markets to increase bets on a potential Fed rate increase, further raising the opportunity cost of holding gold.
Attention now turns to upcoming US economic and inflation data, which could provide clearer signals on the Fed’s next move. For gold, the direction of interest rates, Treasury yields and the dollar is likely to remain crucial as investors reassess the outlook for monetary policy.
