Gold retreats after scaling over 2-month peak on US Treasury move

Gold prices declined on Thursday as investors took profits following a two-month peak in the metal's price, triggered by a surprise U.S. Treasury announcement of increased liquidity support for long-duration bonds. The move weakened the dollar and drove down Treasury yields. Spot gold fell 0.6% to $4,495.69 per ounce by 0331 GMT, down from $4,525.79 earlier that day, its highest level since June 2.

US gold futures rose 0.2% to $4,553.30. The Treasury Department announced it would double the size of its liquidity support buyback operations for longer-dated notes and bonds, a decision made after a significant bond selloff driven by investor demand for higher returns amid inflationary risks stemming from the U.S.-Iran conflict.

The U.S. dollar hovered near three-month lows. Ilya Spivak, head of global macro at Tastylive, noted that the gold rally had "clearly reached a point where there will be some digestion in markets after a big move like that." He suggested that if prices held above the $4,400 to $4,500 range, upward momentum could continue. Total U.S. debt outstanding surpassed $40 trillion for the first time, raising concerns about fiscal stability and drawing warnings of a potential crisis, according to Edward Meir of Marex.

Elevated inflation concerns also surfaced at the Federal Reserve's recent meeting, with several policymakers ready to raise interest rates, according to meeting minutes released on Wednesday. Traders currently price a 67% chance of a Fed hold and a 33% chance of a rate hike in September, as per the CME FedWatch Tool. Despite gold's traditional role as an inflation hedge, higher interest rates typically diminish its appeal.

Silver rose 0.2% to $67.07 per ounce, platinum fell 1.3% to $1,802.29, and palladium declined 0.2% to $1,328.06.