WS Investor
29 Aug 2026, 08:14
Gold Ends Volatile Week With Sharp Selloff as Fed’s Warsh Pushes Treasury Yields Higher
Gold ended a volatile week with a sharp decline on Friday, as a hawkish message from Federal Reserve Chair Kevin Warsh triggered a rise in U.S. Treasury yields and forced investors to reassess the outlook for interest rates.
December gold futures closed Friday at $4,529.90 per ounce, down $134.10, or 2.88%. The decline erased much of gold’s earlier strength after prices had traded above $4,700 during the week.
Earlier in the week, gold benefited from developments in the U.S. Treasury market. The Treasury’s decision to increase the size of its long-dated bond buybacks had helped push longer-term yields lower, reducing the opportunity cost of holding non-yielding gold. The Treasury doubled its long-duration buyback cap from $2 billion to $4 billion per operation, a move followed by declines in both 10-year and 30-year yields.
The environment changed sharply on Friday following Warsh’s first Jackson Hole speech as Fed chair. Warsh emphasized that inflation remains too high and reinforced the Fed’s commitment to returning inflation to its 2% target, prompting markets to increase expectations for further monetary tightening.
Treasury yields jumped in response. The two-year yield, which is particularly sensitive to Fed policy expectations, rose about 9.5 basis points to 4.325%, while the benchmark 10-year yield increased roughly 2.8 basis points to 4.70%. Markets also increased the probability assigned to a September rate hike.
That combination of higher Treasury yields and a more hawkish Fed outlook proved particularly negative for gold. Higher yields increase the relative attractiveness of interest-bearing assets compared with bullion, while expectations for tighter monetary policy can also support the U.S. dollar.
Despite Friday’s steep 2.88% drop, the week highlighted two competing forces for gold: concerns surrounding U.S. debt and the Treasury market continue to provide longer-term support, while persistent inflation and the possibility of additional Fed tightening present a significant near-term headwind.
Gold ended a volatile week with a sharp decline on Friday, as a hawkish message from Federal Reserve Chair Kevin Warsh triggered a rise in U.S. Treasury yields and forced investors to reassess the outlook for interest rates.
December gold futures closed Friday at $4,529.90 per ounce, down $134.10, or 2.88%. The decline erased much of gold’s earlier strength after prices had traded above $4,700 during the week.
Earlier in the week, gold benefited from developments in the U.S. Treasury market. The Treasury’s decision to increase the size of its long-dated bond buybacks had helped push longer-term yields lower, reducing the opportunity cost of holding non-yielding gold. The Treasury doubled its long-duration buyback cap from $2 billion to $4 billion per operation, a move followed by declines in both 10-year and 30-year yields.
The environment changed sharply on Friday following Warsh’s first Jackson Hole speech as Fed chair. Warsh emphasized that inflation remains too high and reinforced the Fed’s commitment to returning inflation to its 2% target, prompting markets to increase expectations for further monetary tightening.
Treasury yields jumped in response. The two-year yield, which is particularly sensitive to Fed policy expectations, rose about 9.5 basis points to 4.325%, while the benchmark 10-year yield increased roughly 2.8 basis points to 4.70%. Markets also increased the probability assigned to a September rate hike.
That combination of higher Treasury yields and a more hawkish Fed outlook proved particularly negative for gold. Higher yields increase the relative attractiveness of interest-bearing assets compared with bullion, while expectations for tighter monetary policy can also support the U.S. dollar.
Despite Friday’s steep 2.88% drop, the week highlighted two competing forces for gold: concerns surrounding U.S. debt and the Treasury market continue to provide longer-term support, while persistent inflation and the possibility of additional Fed tightening present a significant near-term headwind.
