Gold Rally May Continue on Hopes of US Yield-Curve Control

The World Gold Council believes that gold's recent rally towards $4,600 per ounce may continue due to US authorities' efforts to keep long-term borrowing costs in check.

This comes after the US Treasury doubled its buybacks of longer-dated Treasuries following a rise in yields to multi-year highs. The move pressured the dollar and heightened investor worries about Washington's swelling fiscal obligations, now at $40 trillion after doubling in under ten years.

Johan Palmberg, senior quantitative analyst at the World Gold Council, noted that banks face capital constraints, and corporate borrowing for artificial intelligence and data-center projects is vying for investor funds. As a result, a larger portion of Treasury demand now comes from price-sensitive players like hedge funds.

Palmberg sees three main advantages if the US moves towards yield-curve control: weakening the dollar by pushing the adjustment into the currency rather than bond markets, reducing real interest rates as inflation stays high, and increasing gold's appeal as a hedge against financial repression.