Gold Extends Rally on Debasement Trade

Gold climbed above $4,650 an ounce on Tuesday, reaching its highest level in more than three months as US government interventions in the bond market revived the so-called debasement trade that fueled gold’s 65% rally in 2025. The US Treasury Department announced an expansion of its buyback program for long-dated government debt last week in an effort to contain rising borrowing costs, with Secretary Scott Bessent saying he is prepared to increase the buybacks further while also flagging an upcoming longer-term fiscal plan. However, markets speculated that the measures may offer only a temporary solution, while renewing concerns over the risks of a US debt crisis, persistent inflation and dollar weakness. Gold-backed exchange-traded funds have also recorded increased inflows in recent weeks, signaling broader market participation and strengthening investment demand.

Gold pared earlier gains on Monday afternoon but remained around $4,640 an ounce, its highest level since May 14, as technical buying supported a rally fueled by a weaker dollar and the US Treasury’s recent buyback announcement. Bullion gained more than 5% last week after the buyback plan pushed the dollar to multi-month lows. Markets are now focused on the July PCE price index due Wednesday and Fed Chair Kevin Warsh’s speech at the Jackson Hole Symposium on Friday for clues on the interest-rate outlook. Traders are pricing in a more than 40% chance of a rate hike in September, according to CME FedWatch. On the geopolitical front, the Trump administration announced an expansion of secondary sanctions targeting entities and countries that maintain business ties with Iran. Treasury Secretary Scott Bessent warned that at least one major financial institution could be sanctioned this week and suggested China would not be exempt.

Gold rose nearly 1% to above $4,650 an ounce on Monday, reaching its highest level since mid-May, as a subdued dollar boosted the appeal of bullion. Investors are now awaiting US inflation data and comments from Federal Reserve Chair Kevin Warsh this week for clues on the interest-rate outlook. Gold gained more than 5% last week after a US Treasury buyback support plan pushed the dollar to multi-month lows. Markets are now focused on the July PCE price index due Wednesday and Warsh’s speech at the Jackson Hole Symposium on Friday. Traders are pricing in roughly a 40% chance of a rate hike in September, while the probability of rates remaining unchanged stands at around 60%, according to CME FedWatch. On the geopolitical front, the US threatened Iran with what it described as “the greatest financial offensive ever marshalled,” as Washington prepares to impose economic sanctions targeting Iran’s trade partners.