Gold remained firmly above $4,500 an ounce on Friday, extending its advance as a softer US dollar and measures from the US Treasury aimed at easing longer-term borrowing costs continued to support demand for the precious metal.
Bullion has gained around 4% this week, putting it on course for a third consecutive weekly increase. Gold is also more than 11% higher since the beginning of August.
At 01:32 ET (05:32 GMT), spot gold rose 0.3% to $4,530.95 an ounce, while gold futures advanced 0.3% to $4,587.11. Silver climbed 1.0% to $68.79 an ounce and platinum gained 1.6% to $1,866.01. Meanwhile, the US Dollar Index declined 0.1% to 98.77.
Treasury buybacks help gold consolidate above $4,500
Gold has retained most of its gains after decisively moving through the $4,500 level, a threshold it had struggled to clear during its recent recovery. The latest rally extends a sharp rebound from the late-June low of around $3,942 an ounce.
Movements in the US bond market have played an important role in the advance. The Treasury said this week that it would double its purchases of longer-dated Treasury securities through its buyback programme to at least $4 billion per operation during the coming quarter.
The announcement helped bring longer-term yields lower, providing an additional tailwind for bullion.
Treasury Secretary Scott Bessent said on Thursday that the government could increase the scale of the purchases further, while arguing that prevailing yields do not accurately reflect underlying economic fundamentals.
Lower bond yields tend to benefit gold because the metal does not generate interest. As returns on government debt decline, the opportunity cost of holding bullion decreases, making it relatively more attractive to investors.
Falling yields have also put pressure on the dollar, reducing the cost of gold for buyers using other currencies. The US currency was heading towards a weekly decline of more than 0.8%.
Fed outlook and labour data remain in focus
Recent US labour-market figures have provided another consideration for investors. Weekly jobless claims declined, indicating that employment conditions remain relatively resilient despite the unexpected drop in employment recorded in July.
The data leave the Federal Reserve balancing labour-market developments against persistent inflation as investors assess the likely direction of monetary policy.
Markets currently assign roughly a 64% probability to the Fed leaving interest rates unchanged in September and a 36% probability to a rate increase, according to CME FedWatch.
Higher rates would typically present a headwind for gold because they increase the potential returns available from interest-bearing investments compared with non-yielding bullion.
Fed policymakers have also highlighted the potential interaction between monetary policy and the Treasury’s debt-management strategy. Measures designed to reduce longer-term yields could loosen financial conditions at a time when the central bank is still attempting to control inflation.
Iran sanctions add another source of support
Geopolitical risks are also contributing to gold’s appeal after Bessent said the United States would impose the “toughest sanctions” in history on Iran.
He argued that tougher economic restrictions could reduce the need for additional large-scale military operations, although tensions surrounding Iran continue to support demand for traditional safe-haven assets.
ANZ analysts said this week’s rally has also strengthened the broader investment case for gold as investors diversify away from the dollar and US assets.
Gold’s move above $4,500 has coincided with expectations that the Treasury will continue trying to contain longer-term yields, while the accompanying weakness in the dollar has provided additional support for precious-metal demand.