Spot gold rose 2.9% to $4,458.43 an ounce on Wednesday after the U.S. Treasury said it plans to at least double its buyback operations for long-term notes and bonds, triggering a sharp drop in government bond yields. Rising oil prices and a standoff over the Strait of Hormuz kept a separate source of pressure on bullion, while traders awaited the Fed's July meeting minutes for direction on rates.
Treasury buyback plan lifts gold
Gold prices spiked Wednesday, reflecting a steep downturn in U.S. government bond yields after the Treasury Department laid out plans to at least double the size of its buyback operations for long-term notes and bonds. At 09:25 ET (13:25 GMT), spot gold rose 2.9% to $4,458.43 an ounce. Gold futures gained 2.2% to $4,517.20 an ounce.
According to Investing.com: "mitigate episodes of acute market stress" is not the goal behind the buybacks, the Treasury said in a statement, though such actions have been employed to shore up bond market liquidity.
Yields and oil keep pressure on bullion
Bullion had sunk on Tuesday after the yield on 30-year U.S. Treasuries briefly reached an almost two-decade peak. 10-year yields remained close to their highest levels since early 2025 at the same time. Higher yields can hurt gold because bonds become more attractive when they offer better returns, while holding bullion provides no interest income, raising the opportunity cost of owning the metal.
Oil prices have also risen as the standoff in the Middle East continues, adding another source of pressure on the yellow metal. Higher energy prices can feed directly into inflation, which could make the Fed more reluctant to lower borrowing costs or increase the chances that rates remain elevated for longer.
Strait of Hormuz and Fed minutes in focus
The outlook for oil remains closely tied to the status of the Strait of Hormuz. About one-fifth of global oil and liquefied natural gas flows passed through the waterway before the start of the Iran war in late February, making any prolonged disruption a major risk for energy prices and inflation. U.S. President Donald Trump said Tuesday that there were no talks underway with Iran, leaving the future management of the strait uncertain. The framework ceasefire deal signed by Washington and Tehran in June has also expired without a plan for an extension.
Against that backdrop, investors are looking to the Fed's July meeting minutes, due later Wednesday, for clues on how policymakers assessed inflation and the appropriate path for interest rates. Attention will then shift to Fed Chair Kevin Warsh's remarks at the Jackson Hole symposium next week.
Dollar dips as gold gains
At the same time, the U.S. dollar index dipped 0.6% to 99.02. A weaker dollar can bolster gold by making it less expensive for overseas buyers.
Source: Investing.com
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