Gold Soars Above $4,650 as US Treasury Injects Liquidity

The gold market experienced a highly dynamic August, marked by sharp price increases and declines. The month started with a rapid rise from around $4,050 per troy ounce to highs above $4,650 after August 20. This increase was fueled by the US Treasury's decision to double or more than double its purchases of long-term government securities with maturities between 10 and 30 years.

At least $4 billion in additional liquidity for each individual operation was introduced as a measure to address yields on 30-year US Treasury securities, which reached a 19-year high of 5.34%. However, the correction began on August 28 after Federal Reserve Chair Kevin Warsh warned that the Fed 'will have work to do' if policymakers in Washington are not confident that inflation is moving sustainably toward the 2% target.

Expectations of potential Fed action aimed at pushing US interest rates and Treasury yields higher worked against the earlier news about Treasury interventions, contributing to the latest decline in gold prices. Despite this, analysts at Goldman Sachs forecast a gold price of $4,900 per troy ounce by the end of the year.

Gold purchases by central banks around the world have also been on the rise, increasing from 66 to 100 tonnes per month. Victor Dima from Tavex advises investors interested in gold to consider a 'buy and hold' strategy over a period of at least five years due to the upward cycle that could continue for somewhere between five and ten years.