Gold prices remained firmly above $4,500 an ounce on Friday, keeping the precious metal on track for a third consecutive weekly gain.
A weaker US dollar and efforts by the US Treasury to contain longer-term bond yields continued to support demand for bullion.
Gold has gained around 4% this week and is also on course to finish August more than 11% higher.
At 22:12 ET, XAU/USD traded at $4,520.71 an ounce, while gold futures rose to $4,576.51. Silver climbed to $68.43 an ounce, and platinum advanced to $1,867.71. Meanwhile, the US Dollar Index slipped to 98.77.
Gold Holds Above Key $4,500 Level
Gold has preserved most of its recent gains after breaking convincingly above the important $4,500-per-ounce level.
The move puts bullion on course for its third straight weekly advance. It also extends a strong recovery from the late-June low near $3,942.
Much of the latest rally has been linked to developments in the US Treasury market.
Treasury Buybacks Support Gold Prices
The US Treasury announced that it will double purchases of longer-dated government securities to at least $4 billion per operation over the next quarter.
The announcement initially helped push longer-term Treasury yields lower.
Treasury Secretary Scott Bessent later indicated that the government could increase those purchases further. He also argued that current bond yields may not accurately reflect underlying economic fundamentals.
Lower Treasury yields can be supportive for gold because bullion does not generate interest income.
When bond yields fall, investors sacrifice less potential income by holding gold instead of interest-bearing securities. As a result, one of the major headwinds facing precious metals becomes less significant.
Weaker Dollar Adds to Bullion Demand
Lower Treasury yields have also placed pressure on the US dollar.
A weaker dollar generally makes gold more affordable for investors using other currencies, which can increase international demand for the precious metal.
The US Dollar Index was heading for a weekly decline of more than 0.8% as investors reassessed the outlook for US assets amid growing fiscal concerns.
This combination of lower yields and dollar weakness has helped support gold’s latest advance.
Federal Reserve Outlook Remains Important
US labor-market data added another factor for gold investors to consider.
Weekly jobless claims declined, suggesting that the labor market remains relatively stable despite a weaker-than-expected employment report in July.
That could allow the Federal Reserve to remain focused on inflation as markets debate its next interest-rate decision.
According to CME FedWatch data, markets are pricing roughly a 64% probability that the Fed will leave interest rates unchanged in September, compared with a 36% chance of a rate increase.
Higher interest rates can weigh on gold because they improve the returns available from interest-bearing assets. In contrast, lower or stable rates can make non-yielding assets such as gold more attractive.
Treasury Policy Could Complicate Fed Strategy
Federal Reserve officials are also watching how Treasury debt-management policies affect broader financial conditions.
If Treasury actions successfully push down long-term yields, financial conditions could become easier.
That could complicate the Fed’s efforts to keep inflation under control, particularly if policymakers believe monetary conditions need to remain restrictive.
The relationship between Treasury policy and Federal Reserve decisions could therefore remain an important driver for gold prices.
Iran Sanctions Add Geopolitical Support
Geopolitical developments are also influencing precious metals markets.
Bessent said the United States plans to impose exceptionally strong sanctions on Iran, arguing that economic pressure could reduce the need for additional large-scale military operations.
Ongoing geopolitical uncertainty often supports demand for gold because investors traditionally view the metal as a defensive asset during periods of heightened risk.
Gold’s Broader Investment Case Strengthens
ANZ analysts said the latest rally has reinforced gold’s broader appeal as investors seek to diversify away from the US dollar and other US assets.
The break above $4,500 came as markets increased expectations that Treasury officials would continue attempting to manage longer-term borrowing costs.
At the same time, pressure on the dollar has encouraged additional demand for bullion.
For now, gold’s next major move is likely to depend on several factors, including US Treasury yields, Federal Reserve policy, the dollar and geopolitical developments.
As long as these conditions remain supportive, gold could continue attracting investor demand following its strong August performance.
