Gold holds ground after 3% drop on Warsh's hawkish stance

Gold prices remained steady on Monday (August 31) following a sharp decline of over 3% the previous day, caused by remarks from US Federal Reserve chair Kevin Warsh. The precious metal settled at US$4,455.29 per ounce by 0011 GMT, after touching its lowest point since August 19 earlier in the trading session. US gold futures for December delivery dropped 0.6% to US$4,504.90.

Fed chair Warsh stated that the central bank would "have work to do" if policymakers fail to ensure the economy's confidence that inflation will decline to 2% in the near future. This admission of potential interest rate hikes came closer to reality than ever before. Currently, there is a 57% probability of a rate increase at the Federal Reserve's upcoming meeting in September, up from 36% before Warsh's comments, according to the CME FedWatch tool.

Higher interest rates typically have a negative impact on gold prices, as holding a non-yielding asset becomes less appealing. This comes as Iran condemned the US' new economic sanctions on Friday, calling them "state terrorism," while its supreme leader banned actions that could harm "social cohesion" due to concerns that further financial strain could lead to unrest within the country.

Silver prices were flat at US$66.34 per ounce, platinum rose slightly at US$1,822.46, and palladium increased marginally to US$1,424.89.