What caused gold prices to fall after Federal Reserve Chair Kevin Warsh’s first Jackson Hole keynote, how did his warning about persistent inflation and potentially higher-for-longer interest rates affect rate-hike expectations, the U.S. dollar, and the appeal of non-yielding ass

Gold fell because Warsh’s Jackson Hole message was read as hawkish: he said underlying inflation had not improved enough and indicated that rates might need to rise if progress toward the Fed’s 2% target were in doubt. That caused markets to reprice toward tighter policy, lifting yields and the dollar—both adverse for dollar-priced, non-yielding precious metals. 16

• Market reaction: Spot gold reversed from a more-than-three-month high earlier in the week and fell by roughly 3% on Friday, reaching its lowest level since August 20. 49
• Rate expectations: Futures implied about a one-in-three probability of a September 16 rate increase and had fully priced a hike by December. 6 Higher expected rates raise the opportunity cost of holding gold, which produces no income.
• Dollar channel: The dollar posted its strongest daily gain in about 2½ months after the speech. 1 A stronger dollar makes metals more expensive to buyers using other currencies and added to selling pressure.
• Compared with August’s rally: The drop was sharp, but it came after gold had climbed to a more-than-three-month high, supported by dollar-debasement concerns and, earlier, hopes that the Fed might hold rates steady. 25 It was therefore a material pullback from the August advance rather than, by itself, proof that the broader bullish case had ended.
• Broader supports and risks: Gold still had support from concern over U.S. debt and currency debasement. 35 Its main near-term risks were stickier inflation, further Fed tightening, higher Treasury yields, and a stronger dollar. 18
• Other metals: Silver fell more sharply on the day—about 4.2%—while platinum declined about 1.5% and was heading for a weekly fall. 74