Guotai Junan Futures market analyst Zhang Chining suggests that recent upward pressure on US Treasury yields stems not from rate hike expectations but from central bank selling, looser supply, and quantitative tightening anticipation. Consequently, this yield surge is not an outright negative for gold; over the long term, new safe-haven allocation demand could actually provide support, which explains the modest rebound seen as gold's decline ended yesterday.
The Treasury situation escalated overnight when the US Treasury Department announced it would at least double its long-term bond buyback operations, raising the size from $2 billion to at least $4 billion, effective September 9. The news drove long-term yields down, with the 30-year yield briefly dropping to around 5.19%, sparking a strong rally in gold. London gold approached $4,500, and the Shanghai gold Au2610 contract rebounded sharply in overnight trading, breaking through the 970 yuan per gram mark intraday.
What is the Treasury's move really about?
To frame the context, the market is currently holding a large quantity of older 10-year and 30-year Treasury notes, many of which are illiquid and rarely traded. If holders of these securities sell off en masse, yields on these older notes can spike, dragging the 10-year yield higher. As the 10-year yield serves as a benchmark for the risk-free rate, its rise can roil the entire financial market, potentially pushing mortgage rates up and posing risks to the real estate sector and the broader economy.
To ease this yield surge from selling pressure, the Treasury is stepping in. However, given the government's chronic fiscal deficits, it lacks sufficient cash to directly buy back these long-dated bonds. A potential solution is to issue more short-term debt to raise cash, then use those funds to repurchase the illiquid older notes in the secondary market. Essentially, this is a "replace long with short" strategy—swapping some long-term debt for short-term obligations to inject liquidity into the long-end market and stabilize yields. This explains why long-term Treasury yields fell after the announcement, reducing pressure on gold and directly fueling its rebound.
Yet this maneuver plants new seeds of concern. Since it involves substituting long-term debt with short-term obligations, those new short-term debts will eventually need to be repaid. Given the fiscal deficit, the government will likely have to issue even more new debt to cover old obligations. While this operation alleviates the immediate yield spike, it essentially postpones debt risk into the future once again. This recurring pattern, over the long run, elevates refinancing risk and slowly erodes the creditworthiness of both US Treasuries and the US dollar. From that perspective, it could be a long-term positive for gold—as credit is degraded, demand for safe-haven alternatives like gold tends to rise.
Current outlook for gold
Gold's current environment is far from unequivocally positive. Brent crude has briefly surpassed $91, and elevated oil prices continue to stoke inflation expectations, keeping gold under pressure from data-driven challenges. On the other hand, the next FOMC meeting is still some time away, and recent US data—July retail sales falling 0.6% month-over-month, the largest drop in a year; nonfarm payrolls declining by 23,000; and average hourly earnings slowing to 3.2% year-over-year—points to a cooling economy, giving gold some breathing room.
Combined with the price breaking above its previous rebound high on the charts, the technical picture suggests the rebound can continue for now, and gold is likely to maintain a choppy upward pattern in the near term. Still, because the oil-driven inflation issue remains unresolved, the rebound path will probably be bumpy rather than smooth. Key events to watch include the July PCE data due out on the evening of August 26, as well as the Jackson Hole global central bank symposium later this month, where Fed Chair Warsh may offer new policy signals. On the charts, the Shanghai gold Au2610 contract can reference support near the August 13 opening price of around 964.
A look at silver
Silver follows the same broader precious metals logic but has two additional factors at play. First is the weather narrative on the supply side. Chile and Peru are major global copper-producing regions, and a significant portion of silver is produced as a byproduct of copper mining—so any disruption in copper output could affect silver supply. Weather conditions in South America have been unsettled recently, with heavy rains causing floods in northern Chile and El Nino-triggered downpours and landslides in Peru. While most major miners have stated that operations remain largely unaffected so far, and no substantial production cuts are imminent, the weather disruption theme is a visible catalyst that could fuel speculative interest in silver.
Second is market sentiment. Silver has a stronger industrial component than gold, tying it more closely to manufacturing activity and overall risk appetite. If pessimism surrounding growth sectors like chips and AI eases, and risk sentiment recovers, silver could benefit from a more favorable emotional backdrop. On the charts, the silver Ag2610 contract has also extended its rebound, with short-term daily support seen near the August 13 opening price of 16,250.
This commentary was finalized at 11:20 AM on August 20, 2026. The fundamental views expressed are from the Guotai Junan Futures Research Institute. Investors should remain aware of market risks. This content is for informational and educational purposes only and does not constitute investment advice. Any investment decisions made based on this material are the sole responsibility of the investor. Guotai Junan Futures and its affiliates do not guarantee any profits and are not liable for any losses arising from the use of this information. The content is derived from publicly available sources, but no warranty is made regarding its accuracy, completeness, or reliability. Specific trading rules are subject to exchange announcements. This commentary is copyrighted by Guotai Junan Futures and may not be reproduced or distributed without prior written permission.
Comments