Gold Soars to Three-Month High on Dollar Erosion

Gold prices reached a three-month high on Friday, trading at $4,671.20 per troy ounce after a 2.1% increase.

The catalyst for this rally was Treasury Secretary Scott Bessent's announcement to expand buybacks of long-dated US government debt, which would suppress yields and reduce the government's debt-service burden.

However, this move was merely the spark that ignited the current price action. The groundwork had been laid days earlier when the Treasury first floated the buyback expansion on Wednesday, causing bond yields and the dollar index to slip.

Commerzbank commodities analyst Carsten Fritsch argues that the current rally reflects a gradual erosion of confidence in the US dollar as a safe haven, evidenced by investors demanding higher premiums to hold Treasury paper.

The central bank community has reinforced this narrative with robust inflows into gold-backed exchange-traded products. The World Gold Council reported second-quarter net purchases of 288.9 tonnes, a 62% jump year-on-year and a fresh quarterly record.

Tether, the stablecoin issuer, also emerged as a conspicuous buyer, expanding its physical gold reserves by roughly 14 tonnes during the second quarter to bring its total holdings to 146 tonnes with a market value of approximately $18.8 billion.