Gold slips below $4,600: could Warsh turn this pullback into something bigger?

Gold slipped on Friday, retreating further from this week’s three-month high as investors reduced risk before Federal Reserve Chair Kevin Warsh’s first Jackson Hole keynote.

Spot gold traded around $4,588 an ounce in later Asian dealings after falling to about $4,576 earlier, while US futures were near $4,629.

Bullion is set for a small weekly decline after a powerful August rally driven by Treasury-market intervention, fiscal concerns and renewed investor inflows.

The immediate question is whether Warsh reinforces the Fed’s inflation-fighting stance or gives markets enough flexibility to keep real yields from rising further.

Warsh becomes the near-term catalyst

Warsh is scheduled to speak at 10 am ET on Friday at the Jackson Hole Economic Policy Symposium.

Markets are looking for clues on how the Fed will respond to inflation that remains well above target and whether July’s decision to hold rates was a pause or simply a delay before another increase.

OCBC strategist Christopher Wong told The Wall Street Journal that Jackson Hole could move the dollar, yields and precious metals, with gold facing resistance around $4,700-$4,769 and support near $4,520.

A balanced message could help bullion stabilise, while a more hawkish tone would likely lift yields and pressure the non-yielding metal.

Rate markets still see roughly a one-in-three chance of a September hike, with the probability of an increase by December much higher.

That leaves gold vulnerable if Warsh signals that the Fed is prepared to tighten again.

Gold’s technical setup points to consolidation

Gold’s broader technical structure remains constructive despite Friday’s pullback, with bullion still holding above the $4,550-$4,575 support zone that underpinned the latest breakout.

The metal has struggled to sustain gains above $4,650, while the $4,680-$4,700 region remains the first meaningful resistance area.

A decisive break above $4,700 could reopen the path towards $4,770, followed by the stronger $4,820 resistance zone.

Momentum indicators also suggest the rally may need time to reset.

The daily Relative Strength Index moved above 70 earlier this week, signalling strong bullish momentum but also an increasingly stretched market after the rapid August advance.

On the downside, $4,550 is the first level to watch, followed by the 200-day moving average around $4,520.

A sustained break below that area would weaken the near-term bullish structure and could expose a deeper retracement towards the $4,400-$4,450 region.

Fiscal concerns still underpin the bigger gold story

The longer-term case for gold remains broader than Fed policy.

Treasury’s decision to at least double long-end liquidity-support buybacks to $4 billion per operation from September 9 revived concerns around fiscal sustainability and currency debasement.

Saxo’s Ole Hansen said this week that renewed investor demand has become increasingly visible: gold ETF holdings rose by about 60 tonnes in August, while hedge-fund net longs reached an 11-month high.

He sees fiscal stress, central-bank buying, geopolitical uncertainty and the prospect of renewed dollar weakness as structural supports, though he argues some consolidation after the recent surge would be healthy.

That leaves gold caught between two powerful forces. A hawkish Warsh could deepen the near-term pullback, but buyers may view weakness towards the $4,520 area as another entry point.

If yields soften again, the market’s focus is likely to return quickly to $4,700 and, beyond that, the increasingly prominent $5,000 target.