Gold Steadies After Tumbling as Warsh Spurs Fed Rate-Hike Bets

Gold declined after plunging more than 3% Friday following comments from Federal Reserve Chairman Kevin Warsh that reinforced expectations for interest rates to rise before year-end. Warsh's pledge to prioritize fighting inflation pushed markets to reprice the likelihood of tightening monetary policy, weighing on the non-yielding metal.

Higher interest rates increase the opportunity cost of holding gold, which pays no yield and becomes less attractive when Treasury yields climb. The Friday sell-off marked one of the sharpest single-day drops for the metal in recent sessions as traders digested the hawkish shift in Fed rhetoric.

Warsh's comments signal a central bank increasingly willing to tolerate economic pain to bring down inflation, a stance that historically pressures precious metals. Gold typically benefits from dovish policy and low real rates, making the current environment hostile for bulls.

The pullback comes as markets reassess the trajectory of monetary policy, with rate-hike bets rising across futures markets. Traders now face a Fed potentially more aggressive than previously anticipated, a dynamic that could keep gold under pressure if sustained.