Gold Surges as Treasury Buys Back Bonds Amid Fed Hawks
The price of gold has surged to its highest level since June after the US Treasury announced plans to buy back long-dated government bonds. The Treasury will purchase at least $4 billion per operation, with a total capacity of $28 billion, starting September 9 and running through November 4.
Spot gold touched $4,567.90 per ounce on Wednesday, a 4 percent increase from the previous day's close. However, prices have since cooled, slipping 0.3 percent to around $4,584.90 in Thursday's session.
The Treasury's move is aimed at addressing liquidity issues in the bond market, with yields on 30-year Treasuries spiking to 5.34 percent. Despite the intervention, some analysts remain skeptical, noting that the additional buyback capacity amounts to a rounding error against the $10 trillion in outstanding long-dated Treasuries.
The Federal Reserve's hawkish stance is also casting a shadow over gold prices, with higher rates diminishing its appeal as a zero-yield asset. However, CME FedWatch data shows that investors are pricing in a 67 percent probability of the Fed keeping rates steady in September.
In the longer term, gold remains on an upward trajectory, having gained 37 percent over the past 12 months and 5.6 percent year-to-date. Central banks continue to support the market, with the World Gold Council's quarterly report confirming significant reserve accumulation in the second quarter.