Gold Surges to Three-Month High on Treasury's Stealth QE

Gold prices have surged to a three-month high of $4,677 after Treasury Secretary Scott Bessent announced the doubling of bond buyback operations from $2B to at least $4B per operation. This move has softened long-end yields and pressured the dollar.

The increased buybacks are effectively stealth quantitative easing (QE), suppressing yields and benefiting gold. The $6.4 billion inflow into gold-backed ETFs last week, equivalent to 46.7 tonnes, is a reaction to this structural driver rather than the cause of the rally.

The Treasury-Fed tension has become explicit as some argue that these buybacks undermine the Fed's inflation control and belies underlying structural challenges. Gold has cleared its 200-day MA and is testing the $4,680-$4,700 zone, where a sustained break could open the path to $4,775.

However, there are risks ahead. If Wednesday's Core PCE accelerates beyond expectations or if Fed Chair Kevin Warsh delivers a hawkish speech, this flow-driven rally can reverse quickly.