Gold Retreats After Treasury Buybacks Fuel Rally to More Than 2-Month High

Gold prices retreated on Thursday after a strong rally in the previous session, but remained at their highest levels in over two-and-a-half months. The gains were capped amid a short-lived rally in U.S. Treasury bonds and rising oil prices.

The spot price of gold was just above the flatline at $4,523.95/oz, while gold futures added 0.8% to $4,580.05/oz. This comes after the metal surged 4.1% on Wednesday and topped the $4,500 mark for the first time since early June.

The main driver of gold's recent rally has been concerns over interest rates and the fixed-income space. The U.S. Department of the Treasury announced that it would increase the size of repurchases of long-dated government debt to at least $4 billion from $2 billion, sparking a rally in U.S. Treasury bonds.

However, this rally turned out to be short-lived, as traders resumed selling bonds on Thursday, with the 30-year yield last up 3.8 basis points to 5.232%. This was largely driven by an update that total U.S. debt had surpassed $40 trillion, exacerbating fiscal worries.

According to Dan Coatsworth, head of markets at AJ Bell, 'the U.S. national debt reaching such eye-watering levels will concentrate minds on deficit risks in the world's largest economy.' He noted that it would take a U.S. worker more than 615 million years to earn the equivalent of America's $40 trillion national debt.