Gold scales higher on softer US yields as traders await Fed Chair Warsh's speech

Gold prices edged higher on Thursday (Aug 27) amid lingering concerns about currency debasement, as investors focused on the upcoming remarks from US Federal Reserve chair Kevin Warsh. Spot gold rose 0.8% to $4,630.09 per ounce by 0232 GMT, while US gold futures climbed 0.7% to $4,685.50. Kelvin Wong, a senior market analyst at Oanda, noted that the medium-term support for gold comes from the US dollar-debasement narrative and worries over the US budget deficit.

Last week, gold prices surged over 5% following the US Treasury's decision to increase purchases of older long-dated bonds, which raised fears of a weakening US dollar. US Federal Reserve Chair Kevin Warsh's comments at the annual Jackson Hole symposium in Wyoming will likely be closely scrutinized for further direction. Wong explained that "The market is awaiting the speech for greater clarity on how the Fed will navigate the current economic landscape.

If he does not provide specific forward-looking monetary policy guidance, current market pricing for rate hikes is likely to remain largely unchanged."

The CME FedWatch Tool estimates a 36.5% probability of a September US rate hike and a 72.7% chance of a December hike. Recent US inflation data showed a steady annual pace in July, exceeding the Fed's 2% target for the 65th consecutive month. This pause in the decline from a recent peak, driven by concerns over the Iran war, may further fuel central bank deliberations on interest rates. Gold is seen as a hedge against geopolitical and economic risks, but higher rates can diminish its appeal as it does not pay interest.

Geopolitically, Qatar's Prime Minister is set to visit Iran to revive diplomatic ties after a spat over the US' plan to increase economic pressure on Iran with sanctions targeting its trade partners. Spot silver gained 1.7% to $69.28, platinum rose 1.1% to $1,848.57, and palladium increased 0.5% to $1,334.49.