Gold Prices Recover Above $4,600 as Markets Await Fed Chair Warsh's Jackson Hole Speech

Gold prices rose on Thursday, finding stable ground after a recent sell-off triggered by hotter-than-expected U.S. inflation data. Investor attention is now squarely on an upcoming speech by Federal Reserve Chair Kevin Warsh for fresh signals on the central bank's monetary policy path.

As of 21:45 ET (01:45 GMT), spot gold (XAU/USD) traded up 0.7% at $4,625.83 an ounce, while gold futures advanced 0.6% to $4,680.50, according to Investing.com data. The precious metal is recovering from a 1.4% decline on Wednesday that broke a five-day winning streak.

Inflation Data Halts Rally

The recent pullback in gold was prompted by the latest Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge. The report showed that the PCE index rose 3.7% in the year through July, a figure that was unchanged from June and slightly above economists' forecasts of 3.6%.

The data signaled that price pressures remain persistent, pushing the U.S. dollar and Treasury yields higher. This weighs on gold, which is priced in dollars and does not offer a yield. In response, markets increased the probability of a 25-basis-point Fed rate hike in September to around 40%, up from 36% before the data's release.

Focus Shifts to Fed Policy

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The market's next major catalyst is expected to be Fed Chair Kevin Warsh's first major address at the Jackson Hole economic symposium on Friday. Investors are seeking clarity on how the central bank plans to address inflation that has remained stubbornly above its 2% target, particularly after the Fed has moved away from providing explicit forward guidance.

Market participants will also be listening for commentary on the interplay between monetary policy and the bond market. This follows the U.S. Treasury's recent decision to double its planned buybacks of longer-dated debt, an action that has fueled concerns about fiscal policy and its potential impact on the dollar.

Underlying Support for Gold

Despite the pressure from potential rate hikes, analysts at ANZ noted that downside for gold should be limited as a "debasement trade" continues to attract buyers. This refers to investors purchasing gold as a hedge against the risk that persistent government deficits and heavy borrowing could erode the U.S. dollar's purchasing power over time.

This theme has provided a strong counterweight to rate pressures, helping gold remain up approximately 14% this month. The metal also continues to trade above its 200-day moving average, a key technical indicator of long-term momentum, supported by strong inflows into gold-backed ETFs and sustained demand from central banks.