Gold outlook hinges on Warsh speech as hawkish Fed stance may weigh | Markets News

Gold has entered a consolidation phase after surging to a three-month high, with markets now awaiting Federal Reserve Chair Kevin Warsh’s speech at the Jackson Hole symposium for clues on the US central bank’s policy path. While easing expectations of a Fed rate hike and a softer dollar have supported the precious metal, hotter-than-expected US inflation data could push the Fed to reaffirm its focus on price stability. A hawkish signal from Warsh could trigger further correction in gold towards the $4,500-$4,520 support zone, although downside may remain limited ahead of next week’s US nonfarm payroll data.

Performance:

• On August 25, buoyed by a slightly reduced possibility of a Fed rate hike and notion that the Federal Reserve may take extraordinary measures to keep the long-term yields in check, spot gold surged to $4697, highest since May 14.
• Since then, the shiny metal has been consolidating on stabilising US Dollar and somewhat unfavourable US PCE Price inflation readings.
• At the time of writing this article, the shiny metal was trading with a daily gain of 0.30 per cent at $4610 as the US Dollar retreated slightly.

Geopolitics and oil:

• On Tuesday, Canada announced retaliatory tariffs on $20 billion in US goods, beginning on September 8th, 2026. This move is in reaction to the Trump administration’s 50 per cent tariffs imposed on Canada over the weekend.
• The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury has issued a determination expanding economic sanctions under Executive Order 13902, effective August 24, 2026. This expansion applies section 1(a)(i) of the Executive Order to the aviation, digital asset, gold, shipping, and technology sectors of the Iranian economy.
• Iran and Oman have reached a revenue-sharing agreement on the Strait of Hormuz as the two sides are nearing a deal on the management of the Strait of Hormuz.
• Nearly 7-8 mbpd of oil is currently being shipped through the Strait of Hormuz. Although the present volume is nearly 40 per cent of the pre-war traffic, the continuing flow is keeping a lid on oil prices.

Warsh’s speech at Jackson Hole Symposium:

• At 7:30 PM IST on August 27, Fed Chair Kevin Warsh will deliver his keynote address at the annual Jackson Hole Economic Policy Symposium, whose 2026 theme is “Financial Innovation: Implications for Payments and Policy.” While the theme itself may not appear particularly market-moving, Jackson Hole has historically served as a platform for Federal Reserve Chairs to signal important shifts in policy thinking, with market repercussions often lasting for months. This year, however, the backdrop is more challenging.
• Consistent with his policy framework, Warsh has largely refrained from providing forward guidance, a stance that has contributed to uncertainty and kept long-term U.S. Treasury yields elevated. His remarks following the July 29 FOMC meeting also weakened his hawkish credentials, as he neither joined the dissenters advocating a rate hike nor clearly articulated how the Fed intends to return inflation to its target. As a result, Warsh faces a delicate balancing act at Jackson Hole: reassuring markets that the Federal Reserve remains committed to restoring price stability while preventing a further rise in long-term yields driven by policy uncertainty.

Data roundup:

• The US merchandise-trade deficit widened in July from $101.40 billion to $118.80 billion (forecast $100.50 billion), the largest since early last year as imports surged on a pickup in inbound shipments of capital equipment. US Imports increased 3.7 per cent, while US exports of goods fell 2.9 per cent. In the week ending August 15, weekly US jobless claims fell from 207K to 203K Vs the estimate of 208K, while continuing claims fell to 1778K from 1796K in the week ending August 22.
• US PCE Price Index rose 0.2 per cent m-o-m in July Vs the estimate of 0.1 per cent and prior data of -0.1 per cent m-o-m, while PCE Price Index was up 3.7 per cent y-o-y as against the forecast of 3.6 per cent and prior data of 3.7 per cent y-o-y. The second estimate of US Q2 GDP matched the forecast of annualised growth of 1.5 per cent. Q2 personal consumption was revised higher from 3.2 per cent to 3.4 per cent (prior 3.2 per cent). Q2 GDP Price Index came in at 6.4 per cent Vs the forecast of 6.2 per cent as core PCE price Index at 3.6 per cent was hotter than the expected reading of 3.4 per cent. July real personal spending stagnated following an increase of 0.4 per cent in June.

Central bank watch:

• Federal Reserve Governor Lisa Cook denied unproven mortgage fraud allegations repeated by President Donald Trump as he increased his efforts to remove her from the Office. The incident has brought the issue of the Federal Reserve’s independence back in focus.
• Federal Reserve Bank of Cleveland President Beth Hammack said Thursday that rates are not restrictive and now is the time for officials to act to contain inflation. She added that capital markets are showing that interest rates are not putting any pressures on lending or growth.
• ECB’s Executive Board member Isabel Schnabel said that interest rates should rise further due to inflation risks from the Middle East and a strong Euro-zone economy.

ETF and COMEX inventory:

• Total known global gold ETF holdings have risen sharply in August as Fed rate hike chances dimmed and the dollar weakened. Holdings rose for the fifth straight day to reach 98.93 Moz on August 26; thus, erasing almost the entire YTD outflows. Presently, gold holdings are down merely 0.02 Moz YTD as investors added nearly 70 tons to their ETF positions in August. Holdings are down 2 per cent since the beginning of the Iran war on February 28.
• Registered COMEX gold inventory stands at 14.54 Moz, nearly 2.46 per cent up from the cycle low of 14.19 Moz seen on August 7 but down 40 per cent from the record peak of 24.25 Moz witnessed in April 2025.

Fed rate hike probability:

• Probability of the Fed hiking rates in its September 16-17 FOMC meeting stands at 34 per cent, down sharply from 82 per cent seen a month ago.
• Probability of a rate hike by the year-end is 73 per cent, down from 92 per cent seen a month ago.

Dollar Index and yields:

• At the time of writing this article, the US Dollar Index was hovering around 99.10, down 0.1 per cent for the day. The Index is down nearly 2.7 per cent from the cycle high of 101.80 visited on June 24.
• Two-year yields were flattish at 4.21 per cent, while ten-year yields at 4.66 per cent were up 2 bps. Ten-year yields surged to a cycle high of 4.75 per cent before cooling off on US Treasury Secretary announced an enhanced long-term bond buyback program.

Upcoming data:

• Major US data on deck include August final University of Michigan Sentiment and inflation expectations (August 28), August ISM manufacturing (September 1), July JOLTs job openings (September 1), August ADP employment change (September 2), August ISM services (September 3) and August nonfarm payroll (September 4).
• Out of Europe, focus will be on Germany’s employment (August 28) and CPI (August 31); Eurozone’s CPI (September 1); Eurozone’s and the UK’s manufacturing PMI (September 1; Eurozone’s and the UK’s services and composite PMIs (September 3).
• China’s PMIs will be released between August 31 and September 3.

Outlook:

• Spot gold has surged nearly 17 per cent from the cycle low of $3943 reached on June 30. The rally has been driven primarily by receding odds of a Fed rate hike as the US nonfarm payroll report for June unexpectedly turned out to be disappointing. Another major factor that has pushed up gold prices has been the US Treasury Secretary Bessent expanding the long-term bond buyback plan that stoked debasement concerns among investors. However, as the US PCE prices accelerated more than expected in July, the Fed may need to assure markets that it is vigilant on the inflation front.
• The August nonfarm payroll report to be released next week is a crucial report, as an encouraging print will negate the July report as an outlier, more so as March-May reports showed a firm and stable job market.
• The Fed Chair Warsh’s Jackson Hole speech will be important for financial markets. He needs to instil a sense of confidence in investors that the Fed is committed to price stability and has a plan to reach its goals; thus, he is expected to be hawkish. In such a scenario, gold is likely to extend its ongoing correction and can test the support zone of $4500-$4520 in short run. Next major support is at $4450/$4375. Resistance is at $4700/$4770. Nonetheless, overall, downside is expected to be limited as markets will still wait for the nonfarm payroll report.