GOLD UPDATE-->Why Gold fell as much as 3% during the session
Gold suffered its biggest one-day decline since July, falling around 2% after Federal Reserve Chair Kevin Warsh took a hawkish stance on inflation. Gold fell as much as 3% during the session before recovering some of the losses.
The reason is simple:
Warsh made it clear that bringing inflation back to the Fed's 2% target remains a priority.
----->Why Is This Negative for Gold?
Gold does not generate interest or dividends.
So when investors expect higher US interest rates, assets such as bonds and cash become relatively more attractive.
The chain reaction is:
Hawkish Fed
↓
Higher Rate Expectations
↓
Bond Yields & Dollar ↑
↓
Gold Becomes Less Attractive
↓
Gold Prices ↓
##But Is the Gold Bull Run Over?
Not necessarily.
Gold's recent rally has been supported by several structural factors, including strong investor demand and central-bank buying.
Gold-backed ETFs also recorded significant inflows recently, showing that the broader investment interest in gold remains strong.
So the latest fall could simply represent a profit-booking/correction phase after a strong rally rather than the end of the long-term trend.
##What About Silver?
Silver also came under pressure, falling around 3.5% alongside gold.
Silver can be more volatile because, unlike gold, it has a significant industrial-demand component.
So investors should expect sharper moves in both directions.
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