Gold Surges 3%; US$4,500 Within Reach
Gold prices surged sharply during Wednesday's trading (August 19) as a weakening US dollar and falling Treasury yields pushed XAU/USD out of the consolidation range it had held for the past week. Gold traded around US$4,490 per troy ounce, up more than 3.5% for the day and reaching its highest level since June 4.
The surge in gold followed the US Treasury Department's announcement of an increase in the size of its buyback program for long-term government bonds. This policy immediately triggered a rally in the Treasury market, with the 10-year yield falling by more than 5 basis points and the 30-year yield dropping nearly 9 basis points.
Falling yields also weighed on the US dollar. The Dollar Index (DXY) fell approximately 0.87% to the 98.80 level, touching its lowest point since May 29. The combination of a weaker dollar and lower yields served as a strong catalyst for gold, as it reduced the opportunity cost of holding non-interest-bearing assets.
Fundamental support also stemmed from shifting expectations regarding Federal Reserve policy. Softer US labor and inflation data have reduced the probability of a September interest rate hike to around 32%. Markets are now awaiting the minutes from the July FOMC meeting to see whether a majority of Fed officials are leaning toward maintaining rates or keeping the door open for further tightening.
Gold also drew support from concerns over rising US government debt, improving investor demand, and gold purchases by central banks—particularly China. However, risks remain; a spike in energy prices driven by Middle East conflicts could reignite inflation and ultimately keep the possibility of a Fed rate hike alive.
Newsmaker Analysis: Gold's breakout toward US$4,490 indicates that bullish momentum has returned strongly following the easing of yield-related pressure and the DXY's breach of a new low. The psychological level of US$4,500 now stands as the immediate resistance. If this level is decisively broken, the upward momentum could extend to higher levels. However, a gain of more than 3% in a single session also raises the risk of profit-taking, especially if the FOMC minutes reveal a more hawkish tone than the market anticipates. (arl)
Source: Newsmaker.id
