<p>Gold and silver prices are stabilizing after what appears to be a market overreaction on Friday to Federal Reserve Chairman Kevin Warsh's surprisingly hawkish message at the Fed’s annual Jackson Hole gathering.</p>
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<p>Gold finished last week at <a href="https://www.moneymetals.com/gold-price">$4,467 an ounce</a>, down about 3.2% for the week and snapping a three-week winning streak. Silver declined roughly 3.8% to finish just over <a href="https://www.moneymetals.com/silver-price">$67 an ounce</a>. Much of those losses came Friday following Warsh’s remarks.</p>
<p>Warsh told markets Friday that the central bank needs to see convincing evidence that inflation is moving back toward its 2% target.</p>
<p>Investors took his comments as a warning that another interest rate hike could come as soon as September.</p>
<p>Markets are now putting the odds of a September rate hike at more than 50%. That sent shorter-term Treasury yields sharply higher and strengthened the U.S. dollar Friday – both traditional headwinds for precious metals.</p>
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<p>But there is an interesting wrinkle in the recent weakness.</p>
<p>Investors have continued pouring substantial amounts of money into gold. Global gold-backed ETFs attracted more than $6 billion during the week ending August 21, adding nearly 47 metric tons of metal. North American investors accounted for the majority of those inflows.</p>
<p>And despite the sharp pullback at the end of last week, gold remains up roughly 10% during August and is on track for its strongest monthly gain since January.</p>
<p>Meanwhile, geopolitical tensions are once again competing with Fed policy for investors’ attention.</p>
<p>Oil prices jumped more than 3% Monday after renewed fighting between the United States and Iran near the Strait of Hormuz.</p>
<p>Brent crude moved back above $90 per barrel. A sustained increase in energy prices could add another layer of inflationary pressure – potentially complicating the Fed’s efforts to bring inflation under control.</p>
<p>That creates something of a tug-of-war for precious metals.</p>
<p>Higher interest rates and a stronger dollar can pressure gold and silver in the short run, while persistent inflation, geopolitical instability, and concerns over the longer-term fiscal picture continue to provide powerful reasons for investors to own tangible assets.</p>
<p>Attention now turns to Friday’s August employment report.</p>
<p>After July payrolls unexpectedly declined by 23,000 jobs, another weak report could quickly reduce expectations for a September rate hike and provide renewed support for gold and silver.</p>
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<p>For now, the metals are giving back a portion of their impressive August gains – but the larger monetary, fiscal, and geopolitical forces that drove that rally haven’t gone away.</p>
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