Warsh Faces Congress Tomorrow as War Reignites: The Testimony That Could Decide Gold’s Direction

Gold has fallen to around $4,020 to $4,066 per ounce this Monday July 13, down more than 2% as the Middle East ceasefire collapses and oil surges 7%. But tomorrow brings an event that may prove even more consequential for gold’s direction than the war itself: Federal Reserve Chair Kevin Warsh delivers his first monetary policy testimony before the US Congress. In a market where the Fed has become more powerful than geopolitics in setting gold’s price, every word of that testimony matters enormously.

Here is why the stakes are so high. Following the weekend’s escalation — Iran declaring the Strait of Hormuz closed, the US striking 140 Iranian targets, oil jumping 7.1% to $81.40 a barrel — inflation fears have surged. Markets have raised the probability of a September Fed rate hike to nearly 70%. This is what is driving gold down: higher rate expectations strengthen the dollar and make non-yielding gold less attractive. The war matters to gold not through fear, but through the oil-inflation-interest-rate chain.

Warsh’s testimony tomorrow is the moment the market finds out how the Fed itself views this. The minutes from the Fed’s June meeting, released last week, revealed growing inflation concerns, with some policymakers having actually favored a rate hike before rates were ultimately left unchanged. That was before the oil surge. Now, with crude up 9% in five days and the Strait of Hormuz declared closed, Warsh must tell Congress how he sees inflation and what the Fed intends to do about it.

Three broad outcomes are possible. If Warsh sounds firmly hawkish — emphasizing the inflation risk from oil and signaling readiness to hike — rate-hike odds could rise above 70%, the dollar could strengthen further, and gold could fall toward the $3,920 support level that analysts are watching. If he sounds balanced — acknowledging inflation risk but stressing that the oil shock is temporary and driven by a conflict that may resolve — rate-hike bets could ease and gold could stabilize or recover. And if he emphasizes the risk to economic growth from an oil shock, gold could rally meaningfully.

Also this week: the June CPI inflation report, which will show how much inflation had built up before the latest oil surge, and US retail sales data. Together with Warsh’s testimony, these will set gold’s near-term direction.

For buyers, the beacon’s light shows both risk and opportunity. Gold at $4,020 is roughly 28% below January’s record of $5,597 — the deepest discount of the year — yet still up 19.5% over the past twelve months. The structural floor is holding firm: China’s central bank reported its largest monthly gold reserve increase in over two and a half years in June, buying aggressively as prices fell. Analysts identify $3,920 as key support and $4,500 as the breakout trigger. Tomorrow’s testimony may determine which way the market moves next.

Today’s prices: 24K — $130.00/gram | 22K — $119.20/gram | 21K — $113.75/gram

All prices USD. Monday July 13 indicative. Volatile market. Confirm in store.