Gold Holds Near $4,500 as US Treasury Buyback Pushes Yields Lower
Gold prices held near $4,500 per ounce on Thursday (Aug. 20) after posting their biggest daily gain in six months in the previous session. The precious metal was supported by a surprise move from the US Treasury Department to expand buybacks of longer-dated government bonds, a step that pushed Treasury yields lower and improved the appeal of non-yielding gold.
The US Treasury said it would at least double the size of liquidity-support buyback operations for securities in the 10-year to 30-year sector. The move was seen as an effort to ease borrowing costs after long-term yields climbed to multi-decade highs. Lower yields reduce the opportunity cost of holding gold, which does not pay interest. On the same day, the US government also disclosed that total public debt had surpassed $40 trillion for the first time.
Still, the upside for gold may not be straightforward. Markets are now watching whether the decline in Treasury yields can be sustained and whether inflows into gold-backed ETFs begin to broaden. After surging more than 4% in the previous session, bullion could enter a period of consolidation as investors adjust positions following the sharp rally.
Energy-driven inflation also remains a key risk. Oil prices stayed elevated as prospects for an agreement between Washington and Tehran over the Strait of Hormuz remained uncertain. Renewed tensions involving Iran and the United Arab Emirates have also kept Middle East geopolitical risks high. A further rise in energy prices could revive inflation concerns and strengthen expectations for tighter Federal Reserve policy.
Minutes from the Federal Reserve’s July meeting showed that support for higher interest rates extended beyond the three officials who formally dissented. Other policymakers also indicated they could back a rate hike if inflation fails to improve. Higher interest rates are generally negative for gold because they increase the relative attractiveness of interest-bearing assets. During Asian trading, spot gold hovered around $4,495 per ounce, with investors continuing to monitor Treasury yields, the US Dollar, and Middle East developments for the next major catalyst.(mrv)
Source : Newsmaker.id
