Gold edged higher as inflation concerns eased, extending a four-day rally sparked by a surprise bond-market intervention that’s revived concerns over US fiscal policy and dollar weakness.
Bullion eked out a small gain on Tuesday, following an earlier spike that saw prices hit almoist $4,700 an ounce, the highest intraday level since mid-May. Treasuries gained after a decline in crude prices helped soothe inflation fears, with officials from Iran and Oman announcing an “interim framework” aimed at resuming shipping through the Strait of Hormuz.
The drop in bond yields helped boost non-interest bearing gold, which has advanced almost 8% in the past week after US Treasury buybacks aimed at halting a months-long selloff that pushed the longest-dated yields to the highest in almost two decades.
Those efforts have renewed interest in the so-called debasement trade, which helped power gold’s blistering rally last year as investors took shelter in the precious metal and avoided sovereign debt and currencies to protect themselves from runaway budget deficits.
US debt levels have ballooned faster than expected, while court decisions reversing tariffs have cut a source of government revenue just as the Pentagon seeks to increase spending, according to Natixis analyst Bernard Dahdah.
“Despite a higher opportunity cost of holding gold, the market is concerned about fiscal and bond market stability,” he wrote in a note on Tuesday, forecasting bullion will hit $5,000 by year-end and average that level in 2027.
Treasury Secretary Scott Bessent has said he’s prepared to expand buybacks of costlier debt, though he refrained from any further signals on Monday. Investors will also be looking for Fed Chair Kevin Warsh to clarify his views on how the Federal Reserve should react to stubborn inflation when he speaks Friday at the annual Jackson Hole gathering.
Uncertainty over Fed policy was cited by Fidelity Holdings Ltd.’s George Efstathopoulos as a catalyst for doubling his fund’s gold holdings over the past three weeks. The fund manager told Bloomberg News that he began his recent accumulation after retreating from long-dated Treasury following a July Fed meeting that left interest rates unchanged.
Gold’s marked rebound in recent weeks has taken the metal above the 200-day moving average that’s often viewed as an important measure of momentum. In a sign of wider investor participation, bullion-backed exchange-traded funds tracked by Bloomberg added more than 28 tons last week, the most since January.
An uptick in the 25-delta call skew for the biggest gold ETF — a gauge of demand for out-of-the-money call options relative to puts — also signals investors are becoming more bullish and willing to pay for upside exposure.
Adding to policy uncertainty, the metal’s safe-haven attributes are also being tested by growing global trade tensions. The US has threatened economic punishment against countries doing business with Iran as part of a campaign to isolate the Islamic Republic. The world’s largest economy is also spiraling into a trade war with Canada after talks broke down last week.
Gold closed up 0.1% at $4,657.17 an ounce in New York. Silver slipped 0.4% to $68.66 ounce. Platinum and palladium also declined, while the Bloomberg Dollar Spot Index, a gauge of the US currency, was down 0.1%.
With assistance from Jack Ryan.
This article was generated from an automated news agency feed without modifications to text.
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