Gold Near Record Highs, Set for Seventh Weekly Gain

Gold traded above $4,500 an ounce on Friday and was on course for a third consecutive weekly gain, as investors turned to safe-haven metals amid heightened volatility across currency and bond markets, while rising oil prices continued to underscore inflationary risks. The precious metal jumped more than 4% on Wednesday after the US Treasury Department announced plans to at least double its long-term debt buybacks in an effort to contain borrowing costs, driving Treasury yields and the dollar sharply lower. Gold held on to those gains even after Treasury yields reversed Wednesday’s decline amid concerns that the government’s efforts to rein in long-term borrowing costs may provide only a temporary solution. Meanwhile, oil prices extended their advance as the US prepares sweeping new economic sanctions against Iran. Elsewhere, gold remained supported by robust investment demand and continued central bank purchases, particularly from China.

Gold prices rose to $4,530 per ounce on Thursday, holding yesterday's rally at the highest since June as the US Treasury's intervention on bond markets lowered the dollar and reignited the debasement trade. The Treasury Department at least doubled the buyback of notes and bonds in the upcoming financial quarter. It marked another effort by Washington to contain soaring yields in the longer portion of the curve, following Secretary Bessent's call for higher limits on the Federal Reserve's FIMA facility. Lower borrowing costs reduce the opportunity cost for markets to hold precious metals, which carry no coupons. The looming increase in deficit spending combined with expectations that the US government is actively suppressing borrowing costs strengthened calls that precious metals are the ideal protection to downside risks to the dollar's purchasing power.

Gold eased below $4,500 an ounce on Thursday, but held most of the more than 4% surge in the previous session as US Treasury yields retreated sharply after the government moved to rein-in long-term borrowing costs. The US Treasury Department announced it will more than double repurchases of 10-, 20- and 30-year debt in the next few months as the 30-year yield surged to its highest level since 2007 earlier this week. Lower borrowing costs reduce the opportunity cost for markets to hold precious metals, which carry no coupons, making them more attractive to investors. Meanwhile, minutes of the Federal Reserve's July meeting confirmed that some policymakers argued in favor of raising interest rates this year to prevent sharper inflationary pressure later on. Elsewhere, heightened uncertainty in the Middle East as the US and Iran remain at a stalemate kept inflationary risks in focus.