Treasury Buyback Surge Drives Gold to Three-Month High

Gold prices surged to a three-month high of $4,677 on Monday, up 1.6% on the day and more than 5% on the week.

The often-cited reason for this rally is the massive inflow of gold into exchange-traded funds (ETFs), which pulled in $6.4 billion last week, equivalent to 46.7 tonnes - the largest weekly intake in 10 months.

However, experts argue that this is not the primary driver behind the price increase.

The real reason lies with the US Treasury's decision on August 19 to more than double its bond buyback operations from $2B to at least $4B per operation, targeting the 10-to-30-year maturity segment where a buyers' strike had pushed the 30-year yield to its highest since 2007.

This action effectively acts as stealth quantitative easing (QE), suppressing yields and pressuring the dollar - both of which are direct tailwinds for gold.