Gold Retreats from Highs, but Debt and Geopolitical Risks Support the Long-Term Outlook

Gold entered the final week of August under renewed pressure after Federal Reserve Chair Kevin Warsh adopted a hawkish tone at Jackson Hole, warning that inflation remains too high and leaving the door open to further rate increases. Markets subsequently raised the probability of a September hike to roughly 60%, pushing Treasury yields higher and weighing on non-yielding gold. Spot gold fell more than 3% on Friday and traded near US$4,440/oz on Monday, well below its recent high near US$4,700.

Geopolitical developments have added another layer of uncertainty. Renewed US-Iran tensions around the Strait of Hormuz pushed oil prices higher, reinforcing concerns that an energy shock could prolong inflation and complicate the Fed's policy path. On Monday, the US 10-year Treasury yield climbed to around 4.76%, its highest level since January 2025.

Despite these near-term headwinds, gold's broader fundamentals remain constructive. The growing contribution of artisanal and small-scale gold mining (ASGM), estimated at roughly one-fifth of global annual production, highlights the importance of improving supply-chain transparency and responsible sourcing. Rising gold prices have also supported the expansion of ASGM activity in several producing regions.

Meanwhile, elevated government debt, Treasury-market pressures, geopolitical fragmentation and continued central-bank accumulation remain important structural supports for gold. The recent pullback therefore appears more closely tied to changing interest-rate expectations than a deterioration in gold's longer-term investment case.

Near term, gold will remain highly sensitive to US inflation, employment data, real yields and September Fed expectations. A moderation in inflation or renewed concerns over fiscal and geopolitical stability could quickly restore buying interest.