Gold prices are holding near $4,500 an ounce after a strong rally Wednesday, supported by lower Treasury yields and a weaker U.S. dollar. The metal dipped slightly in early Thursday trading but remains close to its recent highs.
At 02:37 ET, spot gold fell 0.7% to $4,491.95 an ounce, while gold futures edged up 0.1% to $4,549.14. Silver rose 0.1% to $67.08 an ounce, while platinum slipped 0.8% to $1,807.32.
The main driver behind Wednesday’s jump was a surprise announcement from the U.S. Treasury. It said it would at least double the size of some of its bond-buyback operations tied to longer-dated government debt.
That increased demand pushed long-dated Treasury yields lower. Because gold pays no interest, falling yields reduce the opportunity cost of holding bullion, making it more attractive to investors.
The dollar also stayed subdued. A weaker dollar makes gold cheaper for buyers using other currencies, which tends to lift demand.
ANZ analysts said the Treasury’s move signals that policymakers want to bring down borrowing costs. They added that easier financial conditions are generally a positive backdrop for gold.
Gold had already been recovering after briefly touching $4,000 an ounce last month. ANZ pointed to renewed investor demand and central-bank buying as factors behind that rebound.
The Federal Reserve’s July meeting minutes offered a more cautious picture. Several Fed officials said they were prepared to raise interest rates. Many indicated a hike would be needed if inflation does not move toward the central bank’s 2% target.
Ariane Curtis from Capital Economics said the minutes confirmed the Fed had turned more hawkish since June. However, she noted that recent inflation, labor market, and activity data have all come in soft, suggesting rate hikes are not immediately likely.
Markets are pricing in a 67.3% probability that the Fed holds rates unchanged at its September meeting, with a 32.7% chance of a hike, according to CME FedWatch.
Higher rates tend to weigh on gold because they make interest-bearing assets more competitive. That tension between the Treasury’s yield-suppressing moves and the Fed’s inflation stance is likely to remain a key factor for gold in the months ahead.
U.S. government debt has now topped $40 trillion for the first time, according to the Treasury Department.
A World Gold Council survey found that 45% of central banks plan to increase their gold reserves, citing inflation and geopolitical uncertainty as key reasons.
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