Gold advances above $4,650 on US Dollar weakness, Treasury bond buyback plans
- Gold price gains momentum to its highest in more than three months near 4,670 in Wednesday’s early Asian session.
- A weaker US Dollar and falling Treasury yields boost demand for the precious metal.
- Trump expanded US sanctions on Iran, targeting countries with business ties to Tehran.
Gold price (XAU/USD) rises to around 4,670, the highest since May 14, during the early Asian session on Wednesday. The precious metal extends the rally amid a weaker US Dollar (USD) and as the US Treasury’s bond buyback plans.
US Treasury Secretary Scott Bessent said last week that the government could increase bond buybacks beyond $4 billion, a day after the department unveiled plans to double buybacks of longer-dated securities. This move has dragged long-term yields lower and triggered massive short-covering.
A softer Greenback makes USD-denominated gold attractive to holders of foreign currencies, while lower Treasury yields reduce the opportunity cost of buying bullion.
US President Donald Trump's administration unveiled an expansion of secondary sanctions it can impose on entities and countries that maintain business ties with Iran around the world, per Reuters.
Rising tensions between the US and Iran could raise energy-driven inflation concerns and boost the prospect of Federal Reserve (Fed) rate hikes in the coming months. This, in turn, might cap the upside for the yellow metal. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Traders will closely monitor the upcoming speech by US Federal Reserve (Fed) Chair Kevin Warsh at the Jackson Hole Symposium on Friday for more clues on the outlook for interest rates. Any hawkish remarks from Fed officials could weigh on the yellow metal in the near term.
Gold rally seen as premature amid lingering energy and rate risks
According to TD Securities, the recent strength in gold may be vulnerable given the broader macro backdrop. The bank highlights that “with the market still pricing in hikes for 2027, and the energy market remaining a notable risk,” they “caution this rally may be too early for a renewed run back to record highs for the yellow metal.”
Technical Analysis: Gold keeps a bullish vibe amid overbought territory
In the daily chart, XAU/USD sustains a bullish near-term bias as it holds well above the 100-day simple moving average (SMA) support and the Bollinger middle band, keeping the broader uptrend intact. Price is now pushing into the upper half of the Bollinger envelope, with the upper band capping the latest advance, while the Relative Strength Index (14) at about 73 has entered overbought territory, hinting that upside momentum is strong but increasingly stretched.
On the downside, initial support is seen at the 100-day SMA around $4,380, followed by the Bollinger middle band near $4,340, with the lower band at roughly $3,955 acting as a deeper cushion if a sharper correction unfolds. On the topside, immediate resistance sits at the Bollinger upper band around $4,725; a daily close above this barrier would open the door for further gains, whereas failure to clear it could prompt a consolidation or a pullback toward the cited supports as overbought conditions unwind.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.