Gold prices surged more than 3% on Wednesday, reaching their highest level since June 4, after the U.S. Treasury announced it would double the size of its liquidity-support buyback operations for longer-dated bonds. The move pushed Treasury yields and the dollar lower, providing a strong tailwind for the non-yielding metal.
Spot gold rose 3.7% to $4,495.02 per ounce, after touching an intraday high of $4,498.69. U.S. gold futures gained nearly 3% to $4,552. The rally was broad-based, with silver jumping 4.3% to $66.03, platinum advancing 5% to $1,798.33, and palladium climbing 3.1% to $1,329.33.
Treasury buybacks weigh on yields
The Treasury's decision to expand buybacks of longer-dated securities sent yields sharply lower. The 30-year Treasury yield dropped more than eight basis points to 5.20%, while the 10-year yield fell nearly five basis points to 4.660%. This reversed part of the recent surge that had pushed the 30-year yield to its highest level since 2007 on Tuesday, adding pressure to gold in prior sessions.
According to Bloomberg sources, the administration may be seeking to contain long-term Treasury rates. Robert Gottlieb, former head of precious metals at Koch Supply and Trading, called the move "totally unexpected" and "very bullish for gold" in a Reuters report, citing lower yields on longer-dated Treasuries and potential dollar weakness.
TD Securities noted that the announcement gave precious metals a "jolt of life," and that investment flows into gold could return quickly if Treasury liquidity support, a Federal Reserve willing to look through an energy shock, and growing stagflation concerns lead to lower real interest rates.
Dollar weakness adds support
The U.S. Dollar Index fell 0.8% to 98.85, making dollar-denominated bullion cheaper for holders of other currencies. This weakness comes ahead of the release of minutes from the Federal Reserve's latest policy meeting. Markets currently price a 65% probability that the Fed will hold rates unchanged at its September 15-16 meeting, according to CME Group's FedWatch Tool, as recent weaker economic data have reduced expectations for a hike.
The Fed has kept rates steady for five consecutive meetings, while inflation remains a key consideration amid higher energy prices linked to the Middle East conflict.
Technical breakout targets $4,700
Gold's rally improved its technical position, with spot gold breaking above its 100-day moving average at around $4,327. A sustained move above this level could open the door to resistance at $4,700 and the May 12 daily high of $4,735. However, a failed breakout above $4,500 could send prices back toward $4,400, with further support at $4,324 and $4,311, followed by the 50-day moving average at $4,249.
The broader precious metals complex benefited from the same macro drivers. As noted in our analysis of Treasury yield moves, falling yields often support assets that do not generate income, and this dynamic is playing out across metals. Additionally, the recent retreat in yields has helped risk assets broadly, though gold's move is particularly pronounced given its sensitivity to real rates.
Investors will be watching the Fed minutes for further clues on the policy path, as well as any additional Treasury actions that could influence long-term rates. The combination of central bank liquidity support and a softer dollar could keep the precious metals rally alive, but a renewed spike in real yields or a stronger dollar remains a key risk.
This article is for informational purposes only and does not constitute financial advice.
