Gold Prices Hit Near-Three-Month High as Dollar Weakens and Bond Buybacks Rise

Gold prices have surged to a near three-month high, extending gains for a third straight week. Spot gold rose 2% to $4,603, its highest level since May 29, driven by a weaker US dollar and the US Treasury's decision to increase bond buybacks.

The US Treasury has announced it will double the size of buybacks of longer-dated Treasury securities over the next quarter. This move aims to keep longer-term yields under control, which is supportive for gold as lower bond yields reduce the opportunity cost of holding non-yielding assets.

Traders now price in a 67% chance that the Federal Reserve will keep rates unchanged next month, while the probability of a hike stands at 33%. This could reduce bullion's appeal because it is a non-yielding asset, but some experts believe gold can still benefit if the move puts pressure on the US dollar.

Billionaire hedge fund manager John Paulson and Jefferies' Global Head of Equity Strategy Christopher Wood suggest that gold could be at the beginning of a long-term bull run. Paulson believes demand for bullion is broadening, led by central banks adding to their reserves alongside rising interest from the private sector.

The World Gold Council echoes this view, stating that gold prices are broadly aligned with a global backdrop of moderate growth and cooling inflation. However, the stage could be set for a possible breakout if clear catalysts such as a worsening economy or renewed geopolitical shocks arise.