The US Treasury Department announced on Wednesday that it will at least double the size of buyback operations for long-dated government debt starting in September, a move that has significantly impacted precious metals markets [1][2]. Following the announcement, silver (XAG/USD) surged to a fresh two-month high at $67.33 during the Asian trading session on Thursday, with the price trading at $67.10 at the time of reporting [1]. The rally in silver was attributed to a sharp decline in long-dated US Treasury yields, with the 10-year yield dropping over 1.5% to near 4.64% and the 30-year yield falling almost 2% from Tuesday’s close to around 5.18% [1]. The US Dollar Index (DXY) also weakened, trading close to a seven-week low at 98.77 [1].
Gold (XAU/USD) initially climbed to its highest level since early June but retreated from those highs during Thursday’s Asian session, erasing part of the previous day's gains of over 3% [2]. The retreat was driven by hawkish Federal Open Market Committee (FOMC) minutes released on Wednesday, which indicated that Federal Reserve officials may need to raise interest rates soon unless inflation shows more progress toward the Fed’s 2% target [2]. Persistent geopolitical tensions, particularly between the US and Iran over the Strait of Hormuz, provided some support to the safe-haven US Dollar, further pressuring gold prices [2].
Despite the hawkish Fed tone, the Treasury’s expanded buyback program has been described by TD Securities as giving “metals a jolt of life,” underpinning renewed interest in precious metals such as gold [2]. Technical analysis for silver shows a bullish near-term bias, with XAG/USD trading well above its 20-period Exponential Moving Average (EMA) at $63.20 and the Relative Strength Index (RSI) at 61.48, suggesting constructive upside momentum [1]. For gold, the XAU/USD pair faced resistance near the $4,510-$4,515 zone, with the RSI at 65.17, hinting at waning upside in the short run [2].
Looking ahead, traders are focused on upcoming US economic data, including the Philly Fed Manufacturing Index and Weekly Initial Jobless Claims, as well as speeches from FOMC members and ongoing geopolitical developments, all of which are expected to influence the US Dollar and precious metals prices [2].
CONCLUSION
The US Treasury's decision to double long-dated bond buybacks has triggered a rally in precious metals, with silver reaching a two-month high and gold initially surging before retreating on hawkish Fed signals. While lower yields and increased liquidity support metals, ongoing Fed rate hike concerns and geopolitical tensions continue to shape market sentiment. Investors are now watching upcoming US economic data and central bank commentary for further direction.