Gold rose 1.5% to about $4,585 a troy ounce on Friday and is on track for its biggest monthly gain since 1999, after the US Treasury unveiled a plan to sharply expand its bond buybacks. Bitcoin rallied alongside it in what traders call the "debasement trade," while gold notched a third straight weekly gain.
Gold rose 1.5% to about $4,585 a troy ounce on Friday. The metal is up more than 13% in August, putting it on track for its biggest monthly gain since 1999.
Treasury's buyback plan sparks the rally
The US Treasury department stunned Wall Street this week with plans to at least double its purchases of securities maturing in 10 to 20 years and 20 to 30 years, an effort to contain a sell-off that had pushed US borrowing costs to multiyear highs. Gold surged more than 4% on Wednesday after the announcement, as Treasury yields and the dollar both dropped sharply.
Treasury secretary Scott Bessent tried to calm the bond market. According to the Financial Times, he argued it had "gotten a little ahead of itself". Investors, sceptical about the US's ability to pay back its public debt and worried about rising inflation, have kept buying gold and bitcoin. Gold held most of its gains even after bond yields recovered, as ActionForex reported investors remain doubtful the measures offer a lasting fix for high borrowing costs.
Bitcoin joins the debasement trade
Bitcoin jumped almost 8% on Friday and is up 24% this week to more than $78,000, its highest level since May. Brent crude is up almost 5% this week, adding to inflation worries. According to ActionForex, gold has drawn additional support from rising oil prices amid US preparations for a new round of sweeping economic sanctions against Iran.
Gold also continues to draw central bank purchases, particularly from China. The non-partisan Congressional Budget Office projects the US budget deficit will register 5.8% of GDP this year, well above Bessent's long-stated goal of reaching 3% by 2028.
Technical picture points higher
On the H4 chart, gold broke higher toward a 4,660 USD target after consolidating near 4,330 USD, with a new range now forming around 4,522 USD. On the H1 chart, the metal is expected to move higher to 4,660 USD, followed by a decline to 4,500 USD, according to the technical setup.
Sources: Financial Times, ActionForex
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