Gold and silver prices surged this week, driven by the US Department of the Treasury's surprise announcement to at least double its liquidity-support buybacks for longer-dated government securities, aiming to contain borrowing costs and stabilize the bond market selloff [1][2][3]. Silver (XAG/USD) traded around $69.75, up 2.41% on Friday and on track for a weekly gain of more than 7%, reaching its highest level in two months [1]. Gold (XAU/USD) rallied to a three-month high, trading near $4,590 after briefly climbing above $4,600, with a monthly gain of around 13% and a weekly gain of nearly 5% [2][3]. Gold futures rose 1.67% to $4,647.70, while spot bullion gained 1.55% to $4,588.08 [3].
The Treasury's buyback plan initially triggered a sharp decline in US Treasury yields and the US Dollar Index (DXY), which traded near three-month lows at 98.65, increasing the appeal of dollar-denominated precious metals [1][2][3]. The US government debt topped $40 trillion for the first time ever, fueling concerns about rising debt, large budget deficits, and persistent inflation, which eroded investor confidence in US assets [3]. Commerzbank noted that the Treasury's actions suggest US authorities may prefer a weaker dollar over persistently higher long-term interest rates, further supporting silver [1].
Market participants are also reacting to reduced expectations of an imminent Federal Reserve interest rate hike, following recent US employment and inflation data [1][2]. Central bank purchases, particularly from China, and stronger inflows into gold ETFs have kept underlying demand for gold firm [2][3]. The World Gold Council's annual Central Bank Gold Reserves Survey found that 89% of respondents expect global central bank gold reserves to increase over the next year, with a record 45% expecting their own institutions' holdings to rise [3].
Technical analysis shows both gold and silver in bullish territory, with XAG/USD holding above key moving averages and an RSI of 70.05 indicating mildly overbought conditions [1]. XAU/USD is above its 50-day, 100-day, and 200-day SMAs, with an RSI near 70 and an ADX around 32, suggesting strong but stretched upside momentum [2]. UBS commodity analyst Giovanni Staunovo expects gold prices to reach $5,400 per ounce over the next 12 months, citing global debt concerns and sustained dollar weakness [3].
However, risks remain. Elevated Treasury yields and rising oil prices linked to Middle East tensions could keep US inflation high and reignite speculation about Fed rate hikes, potentially bolstering the dollar and posing a headwind for precious metals [1][2].
CONCLUSION
The US Treasury's expanded buyback program and mounting debt concerns have triggered a strong rally in gold and silver, with both metals reaching multi-month highs and attracting robust investor demand. While technical indicators suggest bullish momentum, ongoing inflation risks and potential shifts in Fed policy could introduce volatility. Overall, the market sentiment remains positive for precious metals amid persistent macroeconomic uncertainty.