India, Aug. 31 -- Gold just had its worst three-day drop since this rally started in early August. The reason was simple because on Friday, August 28, new Fed Chair Kevin Warsh gave his first big policy speech at the Jackson Hole conference, and it sounded more hawkish than investors expected. That made markets think a rate hike could come as soon as September and higher rates make gold less attractive, since gold pays no interest. So investors quickly sold off, wiping out a chunk of the gains gold had built up over the past few weeks.

Importantly, this correction has come after an unusually strong run: gold rallied more than 13% through August alone, one of its biggest monthly gains fuelled by renewed concerns over US fiscal sustainabi...