Gold is experiencing a powerful rally ignited by Washington's own policy moves, with spot prices hovering near $4,675 an ounce during Tuesday's Asian trading session and extending gains. The precious metal touched an intraday high of $4,680.70 on Monday, marking its strongest level in over three months since May 14.
Since the US Treasury announced expanded long-duration debt buyback operations on August 19, gold has posted gains for four consecutive sessions, accumulating a surge exceeding 7%. The catalyst behind this rally is Treasury Secretary Scott Bessent's "bazooka-style" intervention in the bond market, coupled with deepening market anxiety over the erosion of dollar credibility.
Debt Buyback 'Bazooka': From $2 Billion to $4 Billion, Then Trillion-Dollar Expectations
On August 19, the Treasury announced it would at least double its liquidity support buyback operations for 10-to-30-year long-term bonds, raising the size from $2 billion to $4 billion per operation. Just days later, an even more significant signal emerged—reports indicate the Treasury is considering utilizing nearly $1 trillion from the Treasury General Account to fund the buyback program.
These moves are being interpreted by markets as an attempt by Washington to artificially suppress long-end yields and provide a safety net for its massive debt burden. According to Bloomberg macro strategist Simon White, if the TGA is tapped to finance buybacks, the operation would no longer be strictly defined as "Operation Twist" but would more closely resemble a net liquidity injection. This has positioned gold as a more direct beneficiary of "QE-like" trading than Treasuries themselves.
However, the effect of the buyback lasted barely a day, with long-dated yields subsequently giving back most of their decline. The 30-year Treasury yield remains above 5% despite a brief pullback. Concerns over America's long-term fiscal outlook have not dissipated—with inflation still above target and fiscal deficits continuing to expand, traders are refocusing on the sustainability of US fiscal policy.
Dollar Becomes the Sacrifice: Devaluation Trade Returns
The cost of Bessent's bond market intervention is being paid by the US dollar. The dollar index had previously fallen to a three-month low, and despite a modest rebound to 98.99 on Monday, it remains in a weak position overall. Shaun Osborne, chief FX strategist at Scotiabank, stated plainly: "There's a price to pay somewhere—either in the form of higher Treasury yields or the dollar needs to give way."
Efforts to suppress US Treasury yields are reigniting the so-called "currency devaluation" theme, which drove gold to a 65% surge in 2025. Justin Lin, an analyst at Global X ETFs, noted: "I see macro capital with significant room to pivot heavily into precious metals based on this currency devaluation narrative." For gold, a weaker dollar makes the metal relatively cheaper for non-dollar investors, directly lowering acquisition costs and spurring buying inflows. More critically, concerns about US fiscal sustainability are fundamentally undermining the dollar's credibility as a store of value.
Iran Sanctions Add Fuel: Precious Metals Safe-Haven Demand Surges
Beyond fiscal intervention, geopolitical risks are providing additional momentum for gold. Treasury Secretary Bessent announced "unprecedented" economic sanctions against Iran, targeting nearly 60 entities linked to the country across digital assets, technology, gold, aviation, and shipping sectors. This economic campaign, dubbed "Outcast," aims to sever every potential revenue source for Iran's Islamic Revolutionary Guard Corps.
Developments in the Middle East have significantly enhanced gold's appeal as a safe-haven asset. At the time of writing, gold prices were up 0.5%, silver rose 0.9% to $69.53 per ounce, and platinum and palladium also advanced. The Bloomberg Dollar Spot Index edged slightly lower.
Technical Picture Turns Bullish: 200-Day MA Breakout and ETF Inflows
Gold's technical outlook has shifted decisively bullish. Last week, prices broke above the key 200-day moving average resistance zone around $4,510-$4,520. According to Societe Generale, subsequent upside resistance levels sit at $4,730, $4,770, and the April high of $4,890.
Fund flow signals are equally robust. Gold ETFs tracked by Bloomberg added more than 28 tonnes last week, marking the largest weekly increase since January. Global gold ETFs recorded their biggest weekly inflow in 10 months at 46.7 tonnes, approximately $6.4 billion, led by North American and European listed funds. Notably, Bridgewater founder Ray Dalio recently posted on LinkedIn advising investors to reduce bond holdings and allocate up to 15% of their portfolios to gold as a hedge against US debt crisis risks.
Key Test Ahead: Warsh's Jackson Hole Debut Sets the Tone
The path higher for gold is not without obstacles. Federal Reserve Chair Kevin Warsh is scheduled to deliver his first keynote address since taking office at the Jackson Hole global central bank symposium on August 28. Markets are closely watching how he frames inflation, employment, rate trajectory, and the policy reaction function.
Should Warsh strike a dovish tone, cooling rate hike expectations, precious metals could gain fresh momentum. Conversely, if he emphasizes inflation risks with a hawkish tilt, the dollar and Treasury yields may strengthen, potentially pressuring precious metals in the near term. Ahead of that, Wednesday's PCE price index data will provide crucial short-term guidance. ING commodity strategist Ewa Manthey cautioned that inflation remains stubborn and the Fed still holds the possibility of further rate hikes, suggesting gold's upward journey may not be entirely smooth sailing.
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