Gold held near $4,500 an ounce on Thursday, easing from a recent high as the U.S. Treasury's expanded bond-buyback program pushed long-dated yields and the dollar lower. The move followed a 30-year Treasury yield spike to its highest level since 2007 and news that U.S. public debt topped $40 trillion for the first time. Federal Reserve minutes showing persistent inflation concerns kept the rate outlook in focus.
Gold held near $4,500 an ounce on Thursday after the U.S. Treasury's plan to expand bond buybacks knocked yields and the dollar lower. The metal's advance came alongside renewed unease over the government's fiscal position.
Treasury buybacks pull yields lower
XAU/USD fell 0.7% to $4,491.95 an ounce, while Gold Futures edged up 0.1% to $4,549.14 and XAG/USD rose 0.1% to $67.08 an ounce. The US Dollar Index held little changed at 98.82.
The moves followed the Treasury's plan to double buyback sizes for 10-year to 30-year debt to at least $4 billion per operation, aimed at supporting the long end of the bond market. Gold had jumped more than 4% on Wednesday. The rally came as the 30-year Treasury yield briefly touched 5.34%, its highest level since 2007.
Gold does not pay interest, so when Treasury yields fall, the opportunity cost of holding bullion instead of bonds declines, making gold relatively more attractive to investors.
Debt tops $40 trillion, ANZ points to gold
The buyback plan arrived the same day Treasury data showed U.S. public debt had crossed $40 trillion for the first time, adding to unease over the fiscal outlook. ANZ analysts said the larger buyback program signals that policymakers want to bring down borrowing costs, which they said would typically provide a favorable backdrop for gold. The bank also noted that bullion had already started recovering after briefly touching $4,000 an ounce last month, with renewed investor demand and central-bank buying helping drive the rebound.
Positioning data add context: leveraged funds were net short about 915,000 10-year Treasury futures contracts and roughly 180,000 30-year bond futures contracts in the latest CFTC report, leaving room for the short covering that likely amplified Wednesday's bond-market reversal.
Fed minutes keep inflation in focus
Minutes from the Federal Reserve's July meeting showed several officials were prepared to raise interest rates, with many saying a hike would be necessary if inflation fails to move toward the central bank's 2% target. Markets are nevertheless pricing a 67.3% probability that the Fed holds rates at its September meeting, against a 32.7% chance of an increase, according to CME FedWatch.
Longer-term demand also got a boost: a World Gold Council survey found 45% of central banks plan to increase their gold reserves, citing inflation and geopolitical uncertainty as key reasons.
Sources: Commodities & Futures News, Commodities Analysis & Opinion
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