Gold Slips as Waller's Hawkish Stance Boosts Dollar and US Yields

Gold extended its decline on Friday, with spot gold trading at $4,564.24 per ounce at the time of writing, after falling more than 0.42% intraday. The core driver behind this drop was Federal Reserve Chair Waller's hawkish remarks at the ECB Forum, along with the subsequent rise in 2026 rate hike expectations.

**Waller's Remarks Trigger Market Repricing**

Speaking at the ECB Forum, Waller explicitly stated that the Fed would abandon its forward guidance on interest rates, with future decisions relying entirely on real-time economic data, while emphasizing the Fed's focus on tackling inflation. He also noted that US inflation risks had declined over the past four weeks, but the ultimate impact of AI on the economy and inflation still requires data verification. Waller reiterated that the Fed would steadily proceed with balance sheet reduction, continuously withdrawing market liquidity, further lifting real yields on long-term US Treasuries and raising the opportunity cost of holding gold.

**Rate Hike Expectations Rise, Dollar and Yields Strengthen in Tandem**

In money markets, according to interest rate swap data, traders have priced in a 25-basis-point hike in the Fed's benchmark rate at the December 2026 FOMC meeting, with the probability of an October hike at around 60%. Meanwhile, the policy-sensitive 2-year Treasury yield had previously surged 11 basis points to 4.15%, the 10-year yield rose 6 basis points to 4.53%, and the dollar index strengthened in tandem. Major Wall Street investment banks have reportedly all scrapped their 2026 Fed rate cut forecasts, with most institutions retaining only a single rate cut projection for 2027.

**Policy Uncertainty Amplifies Gold Volatility**

Market reports indicate that Waller's shift away from forward guidance means the market loses a stable anchor for expectations, with every US economic data point individually driving sharp swings in Treasury yields and the dollar. As a non-yielding asset, gold's price is highly negatively correlated with real interest rates, and the blurring of the policy path could significantly widen trading volatility. Analysts suggest that institutional funds may reduce medium-to-long-term gold positions and pivot to short-term trading, while gold ETFs could sustain continued outflows, capping upside potential. The two-way uncertainty between AI-driven inflation pressures and long-term productivity gains is also intensifying divergence between bulls and bears.