Treasury Buybacks Boost Gold as China Continues Heavy Buying Spree

The US Treasury's decision to double its maximum buyback size for long-dated government debt has sent gold prices soaring, but it's not the only force driving the metal higher. China's central bank has been steadily accumulating gold reserves over the past two years, with imports jumping 76% year-on-year in the first five months of this year.

The Treasury's move lifted yields on 30-year Treasuries from above 5.3% to approximately 5.19%, easing the opportunity cost of holding a zero-yield asset like gold. The dollar index also slipped about 0.6% to a two-and-a-half-month low, making bullion cheaper for buyers holding other currencies.

TD Securities analysts see this as a fresh tailwind for precious metals, noting that the combination of a softer dollar and lower yields creates a more hospitable environment for gold. However, technicians note that as long as the metal holds above $4,290, the medium-term structure remains intact within a broader uptrend.

Market attention is now turning to the Federal Reserve's minutes from its latest policy meeting and the Jackson Hole Symposium, where Fed Chair Kevin Warsh will speak. Markets are pricing a 65% probability that the Fed holds rates steady, with weaker US economic data having tempered expectations for further hikes.