Gold Prices Soar on Treasury Buybacks, Face Risks from Higher Yields and Oil Prices

Gold prices surged on Wednesday after the US Treasury Department announced plans to double its buyback operations for long-term notes and bonds. This move aims to shore up bond market liquidity, but it may not be enough to mitigate the risks facing gold.

The yield on 30-year US Treasuries briefly reached a nearly two-decade peak, while 10-year yields remained close to their highest levels since early 2025. Higher yields can hurt gold as bonds become more attractive when offering better returns, and holding bullion provides no interest income.

Oil prices have also risen due to the ongoing standoff in the Middle East, adding pressure on gold. A prolonged disruption of the Strait of Hormuz could lead to elevated energy-driven inflation, making the Fed more reluctant to lower borrowing costs or increasing the chances that rates remain elevated for longer.

The FOMC minutes are set to be released today, and investors' attention will shift to Fed Chair Kevin Warsh's remarks at the Jackson Hole symposium next week. A move by gold futures could accelerate the selling spree in the next two trading sessions, as the weekly closing will provide further directional moves.