Gold drifts higher above $4,500 on US Treasury buyback
- Gold price gains ground to near $4,530 in Friday’s early Asian session.
- US Treasury's announcement that it would increase buybacks of longer-dated bonds supports the Gold price.
- Rising oil prices fueled concern that inflation will prompt the Fed to raise interest rates.
Gold price (XAU/USD) edges higher to around $4,530 during the early Asian session on Friday. The precious metal rebounds after earlier falling following the US President Donald Trump administration’s unexpected decision to boost repurchases of longer-dated bonds.
US Treasury Secretary Scott Bessent said on Thursday that the Treasury could increase bond buybacks beyond $4 billion, partly to signal that current yields do not reflect underlying economic fundamentals. He stressed that interest rates have nothing to do with the buyback decision.
On Wednesday. the US Treasury Department said it will buy back more of its longer-term bonds, in an effort to curb a sharp increase in borrowing costs, per Bloomberg.
However, the potential upside for the yellow metal might be limited amid energy-driven inflation pressures, which raises the prospect of Federal Reserve (Fed) rate hikes in the coming months. Markets are now pricing a 36.2% chance of a Fed rate hike at the upcoming policy meeting, down from 47% a month earlier, according to the CME FedWatch Tool. It’s worth noting that Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Gold underpinned as US policy backdrop supports longer end
According to TD Securities, recent policy signals from Washington are helping to shore up bullion in the near term. The bank highlights that “the signal of the Treasury looking to support the longer end, alongside a Fed willing to look past higher energy prices, should be enough to support the yellow metal in the near-term,” suggesting that the current US rates and policy backdrop remains broadly constructive for Gold despite the latest move higher in yields.
Technical Analysis: Gold maintains a constructive outlook above the 100-day SMA
In the daily chart, XAU/USD keeps a bullish near-term bias as spot holds above the 100-day simple moving average (SMA) and the Bollinger middle band. Price is stretching toward the upper Bollinger band, while the Relative Strength Index (14) at 67.54 suggests strong upside momentum edging toward overbought conditions, hinting that the current advance could be vulnerable to consolidation once the topside band is tested.
On the downside, immediate support is seen near the recent pivot around $4,528, followed by the 100-day SMA at $4,380 and the Bollinger middle band close to $4,252, where buyers may attempt to defend the prevailing uptrend; deeper pullbacks would expose the lower Bollinger band near $3,915 as a more distant structural floor. On the topside, initial resistance is located at the upper Bollinger band around $4,585, and a sustained break above this ceiling would open the path for a continuation of the gold rally toward fresh record territory.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
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