Walsh's debut shocks the market: US dollar jumps nearly 40 points, gold evaporates $80 instantly

Huitong News August 28—— On Friday (August 28) at 22:00 Beijing time, Federal Reserve Chairman Walsh delivered his first keynote address at the Jackson Hole meeting since taking office, making it clear that inflation would be at the core of policy, prompting the market to swiftly price in Walsh's hawkish stance.

On Friday (August 28), at 22:00 Beijing time, Federal Reserve Chairman Walsh delivered his first keynote speech at the Jackson Hole meeting since taking office. Prior to the speech, markets remained divided on the policy roadmap—the US Dollar Index was under pressure and then rebounded near 99.06, while spot gold maintained its high-level volatility. The initial value for the revision of the 2026 US nonfarm employment benchmark, announced the same day, was -79,000 people, below the expected 183,000. Once the speech began, the market quickly moved to price in Walsh's hawkish comments.



During the speech, the US Dollar Index jumped nearly 40 points in the short term, reaching as high as 99.4559; spot gold plummeted about $40, hitting a low of $4550.01 per ounce, briefly falling below the 4550 threshold and marking a new low since August 21. The two-year US treasury yield rose to 4.286%, its highest since July 31; the 10-year yield was roughly flat at 4.676%. US stock indices dipped in the short term, with the Nasdaq falling by about 0.15%. Domestically, SHFE Silver 2610 quickly retraced gains, narrowing its increase to 0.10%, last at 16,847 yuan/kg; SHFE Gold 2610 reversed from up to down, quoted at 989.8 yuan/g, with both trading volume and open interest expanding.

Deep Connection Analysis

Walsh explicitly placed inflation at the core of policy. He pointed out that while summer inflation data showed some improvement, the underlying trend had not significantly improved, and that it is necessary to be certain that core inflation is moving toward the target, otherwise “there is still work to do.” The 2% PCE inflation target was reiterated as “firm and fixed.” At the same time, he emphasized that the labor market remains relatively stable, the likelihood of higher economic growth is rising, financial conditions are hard to describe as restrictive, and there is little evidence of policy tightening in credit markets. The role of forward guidance should remain limited, and policy cannot be based on outdated or inaccurate data; the market should focus on genuine economic information. Artificial intelligence is seen as a new variable affecting the economy and policy implementation.

These remarks mark a clear departure from the previously expected dovish stance projected by some of the market. Before the speech, institutions focused on the potentially dovish signals implied by the downward revision in employment benchmarks; following the speech, pricing shifted swiftly. The market now sees the probability of a Federal Reserve rate hike in September rising to about 50%.

Institutional accounts quickly extracted keywords like “inflation priority” and “financial conditions not restrictive,” emphasizing policy patience and data dependence; retail discussions focused more on the instant pullback in gold and silver, with sentiment shifting from wait-and-see to concerns over short-term pressure on precious metals. Historically, similar hawkish stances have been accompanied by a short-term strengthening of the US dollar and pressure on precious metals, matching current price movements. Both long- and short-term logic point towards a recalibration of the policy path.

For related varieties, the US dollar receives short-term support, gold and silver come under direct bearish pressure, and the short end of the Treasury yield curve rises more significantly.

Trend Outlook

Looking at the market, the US Dollar Index quickly recovered losses and set new intraday highs after the speech, indicating an immediate market reassessment of policy signals. Gold pulled back from highs and broke recent support, with short-term momentum shifting to consolidation. Short-end yield rises and increased rate hike bets reinforced each other, and subsequent trends will depend more on whether upcoming data validate Walsh’s assessment of core inflation and growth resilience. Overall volatility increased significantly after the speech, as the market is digesting changes in policy priorities anew.

FAQ

Q: What is the core tone of Walsh’s latest speech?
He put price stability first, emphasized that the trend in core inflation has not seen significant improvement, and that policy work remains if it does not move toward the 2% goal. He also stated it is hard to call financial conditions restrictive, and that the economy and labor market remain resilient.

Q: How did market pricing of a September rate hike change before and after the speech?
Following the speech, US short-term interest rate futures fell, and market pricing indicated the probability of a September rate hike rose to about 50%, a significant increase from before.