Gold holds near $4,500 as US Treasury buyback sends yields lower

Gold reached near the $4,500 mark after the Treasury Department made an unexpected move to curb long-term borrowing costs. The precious metal surged over 4% the previous day, trading above $4,500 per ounce. The Treasury Department announced it would double the size of liquidity support buyback operations for securities with maturities ranging from 10 to 30 years.

This decision came after total US public debt surpassed $40 trillion for the first time, having increased by a third in under five years. The move aimed to provide greater official support for the Treasury market, potentially leading to more favorable financial conditions and reducing the opportunity cost of holding gold. However, energy-related inflation pressures, particularly in oil, could dampen further gains in gold prices.

Oil prices were up, driven by lingering doubts about a peace deal between the US and Iran over the Strait of Hormuz and growing tensions in the Middle East. A majority of Federal Reserve officials favored raising interest rates in July compared to three dissenting voices. Some officials indicated they might support a rate hike if inflation remains high, according to the central bank's July meeting minutes released on August 19.

Higher interest rates typically negatively impact gold, which does not generate income. Spot gold rose 0.1% to $4,520.05 per ounce at 7:21 am Singapore time, while silver and platinum also edged higher.