Treasury Bond Buy-Backs Spark Gold Rally Ahead of Jackson Hole

The US Treasury's decision to boost its buy-backs of long-maturity bonds has strengthened the debasement trade on gold, as investment banks turn more upbeat on the precious metal. Gold traded at a three-month high of $4,698 an ounce after the announcement, extending a 5.1% gain from last week.

The repurchase programme, unveiled by Treasury Secretary Scott Bessent, is likely to surpass $4 billion and has renewed concerns about fiscal stress on Washington and the erosion of the purchasing power of the US dollar. Gold benefits as an alternative to fiat currencies in such situations.

Investment banks like Morgan Stanley predict that gold prices will rise to $5,000 by 2027, while Citigroup raised its three-month price target for the metal to $4,800 from $4,500. ING also suggests that gold might face a risk of further upside throughout the year.

According to Ewa Manthey, a commodity strategist at ING, 'Gold's resilience suggests that the rally is not simply a response to lower yields.' The prospect of larger Treasury buy-backs has refocused attention on government borrowing and fiscal credibility, reviving concerns about currency debasement. This reinforces gold's appeal as a store of value.