PT Rifan Financindo Berjangka – Gold Hits Highs as US Fiscal Concerns Resurface
Gold prices surged to a three-month high during Friday’s trading (August 21) after aggressive moves by the US Treasury Department to curb rising borrowing costs instead sparked fresh concerns regarding the United States’ fiscal health. Gold is on track to record a weekly gain of approximately 5%, following a policy to increase long-term Treasury bond buybacks that drove a weakening dollar and a drop in yields.
The gold rally began on Wednesday after the US Treasury unexpectedly announced an increase in the repurchase of long-term government debt. While the move aimed to maintain bond market stability and suppress borrowing costs, investors viewed it as a signal of increasing government intervention in the debt market.
The policy reignited concerns about US fiscal sustainability and the potential erosion of confidence in the dollar. Investors began seeking alternative hedging assets, with gold emerging as a primary beneficiary of growing anxiety over the value of the US currency.
Bhanu Baweja, Chief Strategist at UBS Group AG, identified the Treasury’s move as a key catalyst for gold. He noted that US government efforts to suppress borrowing costs could actually put pressure on the dollar, making gold the asset most likely to benefit from such conditions.
Gold’s gains were further bolstered by a weakening US dollar, which fell to a three-month low on Friday. A weaker dollar makes gold cheaper for global investors, thereby boosting demand for the precious metal.
US Treasury Secretary Scott Bessent also signaled that the buyback program could be further expanded. He stated that the government is preparing additional fiscal measures to address the high borrowing costs that have risen in recent years.
Interestingly, gold has managed to maintain its upward momentum even though long-term Treasury yields remain elevated. This suggests that the current gold rally is driven not only by falling yields but also by mounting investor concerns regarding US fiscal credibility and monetary policy. Newsmaker Analysis: Gold fundamentals are currently strengthening, driven by a combination of a weakening dollar, mounting concerns over US debt, and expectations of looser bond market policies. As long as investors question US fiscal stability, gold has the potential to maintain its positive trend. However, the market must closely monitor the Federal Reserve’s policy direction and upcoming inflation data, as shifts in interest rate expectations could trigger volatility in gold prices. (gn)
Source: Newsmaker.id
Gold on Track for Third Weekly Rally; US Moves Act as Key Catalyst
Gold prices maintained positive momentum during Friday’s trading (August 21), hovering near three-month highs. Spot gold rose 1.4% to US$4,582.64 per troy ounce, while gold futures strengthened 1.5% to US$4,641.11. Throughout the week, gold prices surged more than 4%, putting the metal on track for its third consecutive weekly gain.
Gold’s rally continues to be driven by a weakening US dollar and US Treasury Department measures aimed at curbing long-term borrowing costs through an expanded Treasury bond buyback program. The US government plans to double long-term bond buybacks to at least US$4 billion per operation in the coming quarter, while Treasury Secretary Scott Bessent has signaled the possibility of further expanding the program.
Falling Treasury yields are a primary factor supporting gold. When bond yields drop, the opportunity cost of holding non-yielding assets like gold decreases, thereby boosting the precious metal’s appeal. Meanwhile, a weaker dollar makes gold cheaper for global investors, further strengthening demand.
However, the market remains focused on the debate regarding the relationship between Treasury policy and the Federal Reserve’s monetary policy stance. Concerns have arisen that government efforts to suppress long-term yields could loosen financial conditions, even as the central bank strives to keep inflation under control.
Beyond US fiscal factors, yield movements are also influenced by geopolitical risks stemming from the conflict involving Iran, as well as surging artificial intelligence (AI) technology spending, which is driving a need for substantial funding. Currently, the market assigns a roughly two-thirds probability that the Federal Reserve will hold interest rates steady at its September meeting, according to the CME FedWatch tool.
Newsmaker Analysis: Gold’s fundamentals remain bullish, supported by a weakening dollar, US fiscal concerns, and expectations of lower long-term yields. As long as prices hold above the US$4,500 level, the possibility of testing the next psychological level remains open. However, investors still need to be wary of a potential correction if Treasury yields rise again or the Fed signals a more hawkish policy stance. (arl) PT Rifan Financindo Berjangka.
Source : NewsMaker