US Dollar Slump Drives Gold Prices to Three-Month Highs
Gold prices surged more than 5% for the week as the US dollar slid amid a protracted sell-off in longer-end Treasury bonds. The precious metal sat at three-month highs on Friday and was on track for weekly gains of over 5%. At 16:01 ET (20:01 GMT), gold gained 2.1% to $4,617.23/oz, while gold futures climbed 2.2% to $4,673.84/oz.
The sell-off in long-term Treasury bonds has been driven by inflation jitters due to rising oil prices and concerns over the massive amount of debt being issued by mega-cap companies to fund their artificial intelligence infrastructure spending. The yield on the 30-year bond hit a 19-year high of 5.337% on Tuesday, while the benchmark 10-year yield took out a fresh 52-week high of 4.748%. However, after the US Department of the Treasury announced it would increase the size of repurchases of long-dated government debt to at least $4 billion from $2 billion, the yields slid.
The surprise intervention was short-lived, with much of the advance wiped out on Thursday and Friday. Fiscal worries sparked by news that US debt had crossed $40 trillion clouded the mood. Treasury Secretary Scott Bessent attempted to provide more relief by stating that the size of the proposed buybacks could be more than the $4 billion announced.
Rising bond yields tend to act like interest rate hikes, driving up borrowing costs for consumers and businesses, which generally weighs on non-yielding assets such as gold. However, investors are looking to move capital out of fiat currencies and into hard assets due to growing fiscal skepticism, a strategy known as the debasement trade.