Gold remained above $4,500 an ounce on Friday, holding onto a powerful weekly advance as a weaker US dollar and efforts by the US Treasury to reduce longer-term borrowing costs strengthened demand for bullion.
The precious metal has risen roughly 4% this week and is heading towards a third consecutive weekly gain. Gold has also advanced more than 11% since the start of August.
At 01:32 ET (05:32 GMT), spot gold gained 0.3% to $4,530.95 an ounce, while gold futures climbed 0.3% to $4,587.11. Silver rose 1.0% to $68.79 an ounce and platinum advanced 1.6% to $1,866.01. The US Dollar Index, meanwhile, slipped 0.1% to 98.77.
Lower Treasury yields strengthen gold’s appeal
Bullion has consolidated above the $4,500 threshold after finally breaking through a level that had proved difficult to overcome during its recent recovery. The move extends a substantial rebound from the late-June low of around $3,942 an ounce.
Developments in US government debt markets have been a major driver of the latest rally. The Treasury announced plans this week to double its buybacks of longer-dated securities to at least $4 billion per operation over the next quarter.
The initiative helped push long-term Treasury yields lower, improving the relative attractiveness of gold.
Treasury Secretary Scott Bessent said on Thursday that the government could expand the purchases further, while arguing that current bond yields do not accurately reflect underlying economic fundamentals.
Lower yields typically support gold because bullion does not pay interest. As returns available from government bonds decline, investors sacrifice less income by holding the precious metal instead.
Dollar decline provides another tailwind
The Treasury-driven decline in yields has also contributed to weakness in the US dollar, providing additional support for precious metals.
A softer dollar makes dollar-denominated gold less expensive for buyers using other currencies and can therefore stimulate international demand.
The US currency was on course to lose more than 0.8% over the week as investors reassessed the appeal of American assets amid concerns over government finances and borrowing costs.
Fed policy remains a potential hurdle
US labour-market figures are also influencing expectations for gold. Weekly unemployment claims declined, suggesting employment conditions remain relatively stable despite July’s unexpected deterioration in hiring.
Attention remains firmly on the Federal Reserve as policymakers balance labour-market resilience against persistent inflationary pressure.
According to CME FedWatch, markets currently see around a 64% probability that interest rates will remain unchanged in September and a 36% probability of an increase.
Any renewed tightening could weigh on gold because higher interest rates increase the returns available from interest-bearing assets relative to non-yielding bullion.
Fed officials have also raised questions about the interaction between monetary policy and the Treasury’s debt-management measures, as efforts to reduce long-term yields could loosen financial conditions while the central bank is still attempting to control inflation.
Iran tensions reinforce safe-haven demand
Geopolitical uncertainty provided another source of support after Bessent said Washington planned to impose the “toughest sanctions” in history on Iran.
The Treasury Secretary suggested that stronger economic pressure could reduce the need for further major military action, although continuing tensions surrounding Iran are maintaining investor interest in traditional safe-haven assets.
ANZ analysts also pointed to broader diversification away from the dollar and US assets as an increasingly important factor behind demand for bullion.
With Treasury measures weighing on yields, the dollar under pressure and geopolitical risks remaining elevated, gold has maintained its position above $4,500 as it heads towards another strong weekly performance.
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