Gold Rises to Over 2-Month High

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.

Gold prices rose to $4,480 per ounce on Wednesday, the highest since early June, tracking the rally for long-dated US Treasuries after the Treasury Department 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. On top of that, the initial increase in dollar liquidity due to the measures also aid gold prices. Meanwhile, minutes of the Federal Reserve's rate-setting meeting confirmed that a portion of policymakers argued that raising rates this year could prevent sharper inflationary pressure later on.