Gold has extended its rally, reaching levels last seen on May 15, with XAU/USD trading around $4,644, up nearly 0.90% on the day [2]. This upward momentum follows the US Treasury's announcement to increase liquidity-support buybacks for longer-dated government bonds, which led to a sharp decline in the US Dollar Index (DXY) to a three-month low [2]. The move has fueled concerns about US fiscal policy and rising government debt, prompting safe-haven demand for gold and reinforcing themes of USD debasement [2]. Societe Generale analysts note that gold has broken out of a small base formation, reclaimed its 200-day moving average (DMA) near $4,510, and is enjoying an extended rebound [1]. They identify successive upside hurdles at $4,730/$4,770 and the April peak at $4,890, with the 200-DMA serving as key support [1].
Strategists at OCBC highlight that the US Treasury's expanded buyback program signals discomfort with the recent rise in long-dated yields, and the resulting unwind of US steepener positions has reinforced debasement trades, including a weaker USD and a rebound in gold [2]. Despite the buyback announcement, long-term US Treasury yields remain elevated, with the 30-year yield at 5.24%, close to its 19-year high of 5.33%, which could potentially limit further gold gains due to increased opportunity costs [2].
Technical analysis shows that XAU/USD maintains a bullish near-term bias, trading above both the 200-day and 100-day simple moving averages, with a moderately firm Average Directional Index at 33.67 and the Relative Strength Index (RSI) at 71, indicating overbought conditions [2]. Market participants are now focused on upcoming US economic events, including the July Personal Consumption Expenditures (PCE) Price Index release and Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Symposium [2]. The CME FedWatch Tool indicates a 38% probability of a rate hike at the Fed's September meeting [2].
Additionally, energy-driven inflation risks remain in focus due to ongoing tensions in the Middle East, with the US preparing to announce new sanctions against Iran. US Treasury Secretary Scott Bessent is expected to unveil these measures, described as “economic D-Day,” at 18:00 GMT on Monday [2].
CONCLUSION
Gold's rally is underpinned by US Treasury buybacks, a weaker dollar, and safe-haven demand amid fiscal and geopolitical concerns. While technicals remain bullish and key resistance levels are in sight, elevated Treasury yields and upcoming US economic data could influence the metal's next move. Investors are closely watching for further signals from the Fed and developments in US-Iran relations.