Gold surged to its highest point since June, driven by unexpected US Treasury actions and a weakening dollar, with other precious metals also advancing significantly.
Gold rose sharply on Wednesday to its highest level in more than two months and a half, after a surprise move by the US Treasury helped push down long-term government bond yields and the dollar. Spot gold climbed 3.6 per cent to $4,487.91 an ounce, after touching an intraday peak of $4,499.20, its strongest level since 4 June, while US gold futures settled 2.8 per cent higher at $4,545.30.
The rally also carried gold above its 100-day moving average, a technical indicator watched by traders for signs of momentum. Robert Gottlieb, a former head of precious metals at Koch Supply & Trading, told Reuters the move was “completely unexpected” and said it was constructive for bullion because lower Treasury yields and a weaker dollar improve the metal’s appeal.
The dollar index fell 0.8 per cent, making dollar-priced gold cheaper for buyers using other currencies. At the same time, the yield on 30-year US Treasuries dropped sharply from near 19-year highs after the Treasury said it would double the size of its buyback operations to improve liquidity in the long-dated bond market. Axios reported that the Treasury’s intervention is intended to ease borrowing costs, although analysts do not expect it to permanently push long-term rates lower.
TD Securities said in a note that the Treasury’s decision gave metals a fresh lift. The firm added that inflows could return quickly if Treasury market liquidity improves, if the Federal Reserve looks through any energy shock and if stagflation fears grow, all of which could eventually pull real interest rates lower. Traders now see a 65 per cent chance that the Federal Reserve leaves rates unchanged at its 15-16 September meeting, according to CME’s FedWatch tool, after weak recent US data reduced bets on another increase.
Other precious metals also joined the advance. Spot silver rose almost 4 per cent to $65.80 an ounce, platinum gained 5.1 per cent to $1,800.02 and palladium climbed 2.7 per cent to $1,325.12. All four metals were on track for their biggest one-day gain in two weeks.
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