Spot gold climbed 1.4% to $4,582.64 an ounce on Friday, extending a weekly rally past 4% as a softer dollar and new U.S. Treasury bond buybacks eased pressure on non-yielding assets. The rally is largely tied to bond-market developments, while traders now weigh a roughly two-in-three chance the Fed holds rates steady in September.
Gold hovered around a three-month high on Friday, lifted by a weaker U.S. dollar and the Treasury's effort to contain longer-term borrowing costs. Spot gold rose 1.4% to $4,582.64 an ounce, while futures climbed 1.5% to $4,641.11. This week, bullion has rallied more than 4%, putting it on track for a third straight weekly gain.
Treasury buybacks pull yields lower
The rally traces back to moves in the U.S. bond market. The Treasury Department said this week it would double buybacks of longer-dated government bonds to at least $4 billion per operation over the next quarter, and Treasury Secretary Scott Bessent said on Thursday the government could increase those purchases further.
When Treasury yields fall, the opportunity cost of holding non-yielding assets such as gold declines, easing headwinds for the metal. A softer dollar has added to the appeal of bullion by making it cheaper for overseas buyers. According to ING: "higher longer-dated Treasury yields are firmly on the Treasury's radar and need to be addressed".
Fed weighs the debt-management fallout
Federal Reserve officials have urged caution over how the Treasury's debt-management strategy could interact with monetary policy. The concern is that pushing down long-term yields could ease financial conditions even as the Fed tries to keep inflation contained.
Bond yields are also swinging on other forces, including an energy shock tied to the Iran war and heavy spending on artificial intelligence infrastructure. As a result, traders are trying to gauge the Fed's next move: markets currently price a roughly two-in-three probability the Fed holds rates unchanged in September, according to CME FedWatch.
Source: Investing.com
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