The US Treasury Department's announcement to at least double the maximum size of its liquidity-support buyback operations for longer-dated nominal securities starting in September has had a significant impact on precious metals markets this week [1][2]. On Wednesday, this move led to a sharp decline in long-term US Treasury yields, with the 30-year yield falling around 9 basis points to 5.18% and the 10-year yield dropping about 5 basis points to 4.63% [2]. This triggered a rally in both Silver (XAG/USD) and Gold (XAU/USD), with Silver climbing before paring gains to trade around $66.70, down 0.44% on Thursday, and Gold surging over 4% on Wednesday to an intraday high of $4,527, its highest since June 2, before easing to around $4,488 [1][2].
The broader decline in yields also weighed on the US Dollar Index (DXY), which fell below 99.00 on Wednesday to a three-month low and remained near a seven-week low on Thursday [1][2]. This softer US Dollar, combined with lower yields, increased the appeal of non-yielding assets like Gold and Silver, as they reduce the opportunity cost of holding these metals and make USD-denominated commodities more attractive to foreign buyers [1][2].
Despite the short-term relief provided by the Treasury's buyback announcement, both sources highlight that underlying concerns remain. US national debt surpassed $40 trillion on Tuesday, and analysts, including those from ING, caution that the buybacks do little to address persistent fiscal deficits, heavy debt issuance, or elevated inflation expectations [1][2]. Higher energy prices, with West Texas Intermediate (WTI) Oil trading around $86.25 per barrel and up roughly 6% for the week, further add to inflation risks, exacerbated by geopolitical tensions such as the US-Iran standoff [2].
The Federal Reserve's July meeting minutes, released Wednesday, indicate that many policymakers believe further interest rate hikes may be necessary if inflation does not decline sufficiently, which could weigh on non-yielding assets like Silver and Gold in the future [1][2]. Investors are now focused on upcoming US economic data, including the Philadelphia Fed Manufacturing Index and Initial Jobless Claims, as well as further commentary from Fed officials, which could provide fresh direction for yields, the US Dollar, and precious metals [1].
Technically, both XAG/USD and XAU/USD retain a bullish near-term bias, with Silver trading above key moving averages and Gold fluctuating near its 200-day SMA, supported by positive momentum indicators [1][2].
CONCLUSION
The US Treasury's expanded buyback plans have sparked a rally in precious metals by driving down yields and weakening the US Dollar, though gains have moderated as yields rebound. Persistent fiscal and inflation concerns, along with the prospect of further Fed rate hikes, continue to cloud the outlook. Investors are watching upcoming economic data and Fed commentary for further market direction.