Gold Surges to Near Three-Month High on Weaker Dollar and Bond Buyback Move
Gold prices surged to a near three-month high on Friday, extending gains for a third straight week as a weaker US dollar and the US Treasury's decision to increase bond buybacks supported demand for the yellow metal.
The spot price of gold rose 2% to $4,603, its highest level since May 29. The weekly gain was 5%. A softer US dollar made dollar-priced commodities more affordable for holders of other currencies.
The move by the US Treasury Department, which will double the size of buybacks of longer-dated Treasury securities over the next quarter to at least $4 billion per operation, is aimed at keeping longer-term yields under control. This reduces the opportunity cost of holding non-yielding assets like gold, and a weaker dollar makes the metal cheaper for buyers.
Traders now price in a 67% chance that the Federal Reserve will keep rates unchanged next month, while the probability of a hike stands at 33%. Gold is typically seen as a hedge against inflation, but higher interest rates tend to reduce its appeal because it's a non-yielding asset.