Gold Near Three-Month High as US Treasury Buybacks Stoke Dollar Concerns

Gold climbed to its highest level in three months as the US government's expanded intervention in the long-term Treasury market deepened concerns about dollar weakness.

Spot gold rose 0.4% to $4,619.17 an ounce as of 7:53 a.m. Singapore time on August 23, according to Bloomberg. It gained more than 0.5% earlier in the session to trade above $4,620. Gold also jumped more than 5% last week, marking a third straight weekly advance.

The rally followed the US Treasury Department's decision to expand buybacks of long-term government bonds. The department announced last week that it would sharply increase those buybacks, after which Treasury yields and the dollar both fell. The government's direct effort to lower long-term borrowing costs fueled demand for gold as a haven asset amid concern that confidence in the dollar could weaken.

The so-called debasement trade is also back in focus. Demand for scarce assets such as gold tends to increase when investors worry that widening fiscal deficits and rising national debt will erode the value of fiat currencies. A weaker dollar also enhances gold's appeal because the metal is priced in the US currency.

Treasury Secretary Scott Bessent said after announcing the expanded long-bond buybacks that he was prepared to further increase repurchases of high-yielding government debt. He also said fiscal measures aimed at lowering government borrowing costs, which have climbed to their highest levels in years, would be unveiled soon.

Ray Dalio, founder of Bridgewater Associates, also called for bigger allocations to gold. He said investors should cut bond holdings and allocate as much as 15% of total assets to gold to prepare for a US debt crisis. Silver also rose 0.4% to $69.29 an ounce.