Gold, silver, miners surge as Treasury doubles buybacks

Gold, silver, and mining stocks experienced a surge on Wednesday following the U.S. Treasury's unexpected announcement to nearly double its purchases of long-term government debt. This decision sent yields and the dollar lower, benefiting precious metals. Spot gold reached approximately $4,484 per ounce, a 3.46% increase from the previous day's close, while silver gained 3.33% to around $65.44 per ounce.

The dollar index declined by 0.78%, and the 10-year Treasury yield dropped by 1.27%, while the 30-year yield fell by 1.84%. Mining companies, which have outperformed the metal this month, saw even bigger gains. The VanEck Gold Miners ETF (GDX) rose 8.8% to about $96.88, Agnico Eagle Mines (TSX: AEM; NYSE: AEM) increased by 8.85% to roughly $282.44, and Barrick Mining (NYSE: B; TSX: ABX) climbed 7.66% to $45.33.

This rally demonstrates how sensitive precious metals are to movements in the long end of the Treasury market. The lower yields reduce the opportunity cost of holding non-yielding gold, and a weaker dollar makes the metal more affordable for international buyers. The Treasury's move to increase its liquidity support buyback operations for 10- to 30-year securities, by at least double, came as a surprise.

This decision is driven by mounting pressure in the long end of the Treasury market, as evidenced by the highest financing costs for 10-year maturities since 2007 and the steepest yield since 2001 for 30-year sales. The Treasury Secretary, Scott Bessent, has emphasized that he measures his success based on the 10-year yield, which he wants to be at a "3" handle, below 4%.

While it remains uncertain whether larger buybacks can maintain lower long-term yields, the Treasury's signal could encourage further short-covering. As a result, gold and silver investors saw an immediate effect, as Treasury intervention alleviated pressure from two of the precious metals' biggest headwinds - elevated long-term yields and a strong dollar.