Gold Surges Past $4,600 as US Treasury Buyback Plans Weaken Dollar

Gold (XAU/USD) rose to around $4,625 during early Asian trading on Monday, marking its highest level since May 15. The rally was fueled by a softer US dollar after the Treasury signaled plans to expand its bond‑buyback program.

US Treasury Secretary Scott Bessent said on Thursday the government could increase bond buybacks beyond $4 billion, following an earlier announcement to double purchases of longer‑dated securities. The prospect of larger buybacks has cooled Treasury yields and pressured the dollar lower, which in turn makes dollar‑priced gold more affordable for international buyers.

“A big factor, of course, is technical… next step is $4,700 if this momentum continues, but also I think it’s been very much driven by a drop in the U.S. dollar,” said Bart Melek, global head of commodity strategy at TD Securities.

However, lingering energy‑driven inflation concerns and ongoing Middle East tensions could keep the Federal Reserve on a tighter policy path, potentially limiting gold’s gains. Higher rates tend to diminish the appeal of non‑yielding assets such as gold.

Iran’s Foreign Minister Abbas Araghchi dismissed the threat of fresh US economic sanctions as a “desperate” ploy, even as President Donald Trump announced a new campaign to increase pressure on Tehran’s economy.

Treasury support at the long end underpins Gold as Fed looks through energy

TD Securities noted that “the signal of the Treasury looking to support the longer end may offer enough support on its own,” especially for gold and the broader precious‑metals complex. This is reinforced by “a Fed willing to look past higher energy prices,” which helps sustain the current higher trading range and leaves room for further upside as trend‑following flows respond to the evolving policy backdrop.

Technical Analysis: Gold maintains a constructive outlook amid overbought RSI momentum

In the daily chart, XAU/USD holds a bullish near‑term bias as it trades above the 100‑day simple moving average and the Bollinger middle band, keeping the broader uptrend intact. The 14‑period Relative Strength Index sits at 70.81, signaling overbought conditions and suggesting that upside momentum may be stretched even as price approaches the upper Bollinger band.

Immediate resistance aligns with the Bollinger upper band near $4,675.80, where fresh supply could emerge if buyers attempt another leg higher. Initial support is seen at current levels, followed by the 100‑day SMA at $4,379.39 and the Bollinger middle band at $4,305.50. A deeper correction would expose the lower Bollinger band around $3,935.20.

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe‑haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe‑haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell‑offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe‑haven status. As a yield‑less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Source link