Gold on Track for Third Weekly Rally; US Moves Act as Key Catalyst
Gold prices maintained positive momentum during Friday's trading (August 21), hovering near three-month highs. Spot gold rose 1.4% to US$4,582.64 per troy ounce, while gold futures strengthened 1.5% to US$4,641.11. Throughout the week, gold prices surged more than 4%, putting the metal on track for its third consecutive weekly gain.
Gold's rally continues to be driven by a weakening US dollar and US Treasury Department measures aimed at curbing long-term borrowing costs through an expanded Treasury bond buyback program. The US government plans to double long-term bond buybacks to at least US$4 billion per operation in the coming quarter, while Treasury Secretary Scott Bessent has signaled the possibility of further expanding the program.
Falling Treasury yields are a primary factor supporting gold. When bond yields drop, the opportunity cost of holding non-yielding assets like gold decreases, thereby boosting the precious metal's appeal. Meanwhile, a weaker dollar makes gold cheaper for global investors, further strengthening demand.
However, the market remains focused on the debate regarding the relationship between Treasury policy and the Federal Reserve's monetary policy stance. Concerns have arisen that government efforts to suppress long-term yields could loosen financial conditions, even as the central bank strives to keep inflation under control.
Beyond US fiscal factors, yield movements are also influenced by geopolitical risks stemming from the conflict involving Iran, as well as surging artificial intelligence (AI) technology spending, which is driving a need for substantial funding. Currently, the market assigns a roughly two-thirds probability that the Federal Reserve will hold interest rates steady at its September meeting, according to the CME FedWatch tool.
Newsmaker Analysis: Gold's fundamentals remain bullish, supported by a weakening dollar, US fiscal concerns, and expectations of lower long-term yields. As long as prices hold above the US$4,500 level, the possibility of testing the next psychological level remains open. However, investors still need to be wary of a potential correction if Treasury yields rise again or the Fed signals a more hawkish policy stance. (arl)
Source: Newsmaker.id
