Gold set for third weekly gain on US Treasury buyback plans

GOLD was on track for a third weekly gain on Friday (Aug 21) after the US Treasury’s unexpected ramp-up in buybacks of long-dated US government debt underscored concerns about its burden.

Bullion was trading around US$4,560 an ounce, and was poised to end the week around 4 per cent higher.

The US Treasury’s surprise liquidity injection on Wednesday sent yields and the US dollar lower, while boosting bullion.

On Thursday, US Treasury Secretary Scott Bessent said he is prepared to expand buybacks of costlier debt and flagged the administration would soon unveil a fiscal initiative to address the highest borrowing costs in years.

While yields retraced much of the decline the buyback prompted later in the week, the move reflects concerns about soaring US government debt. That is one of the themes that propelled gold’s earlier multi-year rally as investors sought alternative safe havens.

“What is interesting is that gold has held up even as long-end Treasury yields remain elevated. That suggests the rally is increasingly about dollar weakness and US fiscal or monetary credibility, rather than simply a lower-yields story,” said Charu Chanana, chief investment strategist at Saxo Markets.

Should gold close above the 200-day moving average at around US$4,514 an ounce, “that would be an important technical signal after several failed attempts to regain momentum,” she added.

Bullion’s rally of around 11 per cent so far in August could be tempered by the rebound in energy prices that keeps inflation risks and US rate-hike bets on the table.

Oil is set for a sharp weekly gain after US President Donald Trump’s threat to crush the Iranian economy further dimmed prospects of a near-term deal to reopen the Strait of Hormuz. The White House says it will release details of the plan on Monday.

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The yellow metal has held above the key US$4,000-an-ounce support threshold since mid-July, when dip-buyers emerged after a war-driven slump pushed it into bear territory the month before. It’s still down around 15 per cent from before the US-Iran conflict erupted in late February.

Spot gold rose 1 per cent to US$4,563.99 an ounce at 2.42 pm in Singapore. Silver advanced 1.3 per cent to US$68.98 an ounce. Platinum and palladium also rose. The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.2 per cent lower, on track for a weekly loss. BLOOMBERG