Gold climbs above $4,600 as Treasury buybacks fuel dollar-debasement fears, while investors await US inflation data and the Fed chair’s Jackson Hole speech.
Gold prices climbed to their highest level since mid-May on Tuesday, extending a rally fuelled by renewed buying and growing concerns over the outlook for the US dollar.
Spot gold rose 0.4 per cent to $4,668.19 an ounce by 0146 GMT after touching its highest level since May 14. US gold futures gained 0.6 per cent to $4,724.50.
The latest gains came as investors assessed the impact of the US Treasury’s decision to increase liquidity support through buyback operations for longer-dated government debt. The move has revived concerns about potential dollar debasement and strengthened demand for gold as a store of value.
“Gold has continued higher,” IG market analyst Tony Sycamore said, pointing to the return of the so-called debasement trade as a key driver of the latest gains.
Analysts expect gold to remain well supported, with buying interest likely to emerge on price dips. Sycamore said the metal could move towards the next resistance levels around $4,900 to $5,000.
TD Securities also said concerns about US dollar debasement could support gold in the coming weeks, particularly as the Federal Reserve has yet to send a clear signal that it is prepared to aggressively counter higher inflation.
More from BusinessGold is traditionally viewed as a hedge against inflation, although higher interest rates can weigh on demand because bullion does not generate interest income.
Markets are now turning their attention to the US Personal Consumption Expenditures price index, the Federal Reserve’s preferred inflation gauge, due on Wednesday.
Investors are also closely watching Federal Reserve Chair Kevin Warsh’s debut speech at the annual Jackson Hole conference later this week. His remarks are expected to provide clues about the Fed’s approach to inflation, bond yields and monetary policy independence.
Gold is also benefiting from heightened geopolitical uncertainty. Iran has vowed to retaliate after Washington expanded economic sanctions aimed at cutting off Tehran’s economic lifeline, adding another layer of uncertainty for global markets.
Other precious metals also moved higher. Spot silver rose 0.3 per cent to $69.16 an ounce, platinum gained 0.4 per cent to $1,883.93, while palladium rose 0.2 per cent to $1,359.
