Gold Surges on Treasury Debt Buybacks and Dollar Weakness

Gold prices surged to their highest level in three months after the US Treasury's unexpected move to buy back long-dated government debt, sparking concerns about fiscal burden and dollar weakness.

The rebound in energy prices could temper gold's rally, which has seen a 14% increase so far in August. The price of spot gold rose 2.2% to $4,614.63 an ounce on Friday.

UBS Group chief strategist Bhanu Baweja said the Treasury's move was a 'very important signal for gold', adding that bullion would be the main beneficiary of the US effort to suppress borrowing costs.

The debasement trade, which saw heavily indebted countries like Japan and France emerge from the Covid pandemic with little appetite for fiscal discipline, is back on the table. This trend could profit precious metals as inflation and currency weakness become more likely.