Gold Prices Surge as Yield Curve Steepens and US Treasury Buys Bonds

Gold prices have been on the rise again after a difficult start to 2026. The metal had a strong multi-year run, peaking in January at above $5,500 an ounce, but it tumbled and even threatened to collapse through the key psychological barrier of $4,000 an ounce.

However, since late July, gold has rebounded aggressively, clearing $4,600/oz for the first time since May in mid-August. This shift is attributed to the US Treasury's move to buy long-dated government bonds, which has sparked investor worries about fiscal incontinence across the G7.

According to Ian Williams, a fund manager at YFS Charteris Gold and Precious Metals Fund, gold tends to rise when the yield curve steepens and fall when it flattens. The US yield curve between near-term debt and long-term debt has steepened, which is contributing to the increase in gold prices.

Gold ETFs have seen a significant influx of investors, adding 70 metric tons in July and August, reversing the 93 tons of outflows seen in May and June. Morgan Stanley believes there could be considerably more room to run for gold, predicting it will break above $5,000 an ounce in 2027.