Fed Chair Warsh Says Inflation Risks Are Receding, Sending Gold Rebounding by Nearly $100

TradingKey - On Wednesday (July 1), Eastern Time, Federal Reserve Chairman Warsh stated at the ECB's annual forum in Sintra, Portugal, that while recent US inflation expectations and inflation risks have receded somewhat, the Federal Reserve remains committed to bringing inflation back to its 2% target and will not lower its policy standards due to the easing of short-term pressures.

Warsh noted that the US inflation outlook has improved since the Fed's last policy meeting, particularly with the recent pullback in oil prices easing market concerns that energy prices would push inflation higher again. However, he also emphasized that if households, businesses, or financial markets believe the Fed will accept an inflation target higher than 2%, those expectations will be proven wrong. Warsh stated that the Fed's mandate is to achieve price stability in the US, and the FOMC will continue to formulate policy around this goal.

Notably, Warsh did not provide clear guidance for the July interest rate meeting, nor did he directly address market speculation about whether rate hikes are still on the table. He emphasized that rate decisions will depend on subsequent economic data and internal Fed discussions, rather than signaling a clear path to the market in advance. This stance continues his more cautious communication style, featuring less forward guidance, since taking office.

Gold Price 1-Hour Chart, Source: TradingView

Following the speech, short-term US Treasury yields eased, indicating that some traders scaled back their bets on near-term rate hikes; gold ( XAUUSD) surged rapidly in the short term, gaining nearly $100 to touch a high of $4,115.36; however, US stocks showed a mixed performance, with the Dow Jones Industrial Average hitting a record high intraday, while the S&P 500 and Nasdaq slid, dragged down by weakness in chip stocks.