Key Takeaways:
Gold miners led Hong Kong's decline Monday as hawkish Fed remarks lifted September rate hike odds to 56.9 percent, sending spot gold down 0.3 percent to $4,439/oz.
"Gold is getting slapped hard as Chair Warsh affirms that inflation isn't meaningfully slowing and the Fed has 'work to do,'" Tai Wong, independent analyst, said. "While it may once again be 'speak loudly and carry a short stick,' this will make the market price the September meeting as a coin flip."
The Hang Seng Index fell 0.9 percent to 25,350 with turnover at HK$70.3 billion. ZIJIN MINING (02899.HK) dropped 5.6 percent to HK$36.14, LINGBAO GOLD (03330.HK) slumped 11.2 percent to HK$21.04, and CHOW TAI FOOK (01929.HK) declined 5.5 percent. Gold futures for December delivery in New York fell 0.9 percent to $4,487/oz.
The selloff comes as traders price a 56.9 percent probability of a September rate increase, up from 39.9 percent before Warsh's speech, according to the CME FedWatch tool. A hike would raise the opportunity cost of holding non-yielding gold, pressuring the metal and related equities ahead of the Federal Open Market Committee's September 16 meeting.
Warsh told the Jackson Hole economic symposium Friday that unless policymakers are confident underlying inflation is returning to the Fed's 2 percent target, the central bank has "work to do." His FXS Speechtracker score of 7.4 versus a 6.5 historical average confirmed the hawkish tilt, while the FXS Fed Sentiment Index held at 129.70, firmly in hawkish territory.
The selloff swept across the sector. ZIJIN GOLD INTL (02259.HK) fell 7.9 percent to HK$148.4, CHINAGOLDINTL (02099.HK) dropped 8.1 percent to HK$251.2, and CHIFENG GOLD (06693.HK) declined 8.1 percent to HK$40.26. ZHAOJIN MINING (01818.HK) lost 5.6 percent to HK$22.6, while WANGUO GOLD GP (03939.HK) fell 4.8 percent to HK$14.85. TONGGUAN GOLD (00340.HK) slid 8.9 percent to HK$3.325 and HANKING GOLD (03788.HK) dropped 6.6 percent to HK$3.345.
Jewelry names also suffered. LUK FOOK HOLD (00590.HK) fell 7.5 percent to HK$22.08, CHOW SANG SANG (00116.HK) declined 4.7 percent to HK$14.49, and ZHOU LIU FU (06168.HK) dropped 3.3 percent. LAOPU GOLD (06181.HK) fell 3.5 percent.
SD GOLD (01787.HK) bucked the trend, rising 4 percent to HK$26.54 after reporting first-half net profit of RMB3.543 billion, up 26.2 percent year-over-year, despite revenue falling 5.6 percent to RMB53.588 billion on lower externally purchased gold volumes.
The geopolitical backdrop added to the pressure. The US military struck Iranian rocket launchers preparing to send mines into the Strait of Hormuz, Bloomberg reported Sunday, the first US military action against Iran in more than a month. The escalation could fuel oil-driven inflation concerns, further complicating the Fed's path.
Deutsche Bank maintained its forecast for rate increases at the September and December meetings, totaling 50 basis points this year, while Nomura said the Fed has become more sensitive to near-term inflation readings. Gavekal Research noted Warsh's stance could put the Fed at odds with the Treasury, which expanded long-term buybacks this month to contain rising yields. The US 10-year Treasury yield stood at 4.721 percent, while the 30-year eased to 5.207 percent.
TD Securities said a more hawkish tone from Warsh could test recent optimism in precious metals but "the bar is likely high to reverse the improved sentiment," with positioning and underlying narratives still broadly supportive. Gold had risen roughly 14 percent in August, its strongest monthly gain this century, according to Susquehanna.
This article is for informational purposes only and does not constitute investment advice.
