Gold heads for third weekly gain on softer dollar, lower US yields

Gold prices edged higher on Friday, poised for a third consecutive weekly gain, driven by a weaker dollar and increased US Treasury bond buybacks. Spot gold rose 0.5 percent to $4,540.18 per ounce, marking its highest level since early June. This week, gold prices have climbed 3.6 percent, while US gold futures increased 0.6 percent to $4,596.60.

The dollar's weekly decline made greenback-priced bullion more affordable for international buyers. US Treasury Secretary Scott Bessent hinted at further boosting the government's purchases of Treasuries. Treasury officials announced they would double the size of longer-dated security buybacks over the next quarter to at least $4 billion per operation.

Two Federal Reserve officials expressed uncertainty about how the Treasury's debt management adjustments might influence the US central bank's monetary policy stance. Gold's rise would ultimately depend on the Federal Reserve's future decisions and their potential impact on market rate expectations. Recent unemployment data showed a decline in Americans filing for benefits, indicating a stable labor market despite a July employment drop.

This stability leaves the Fed in a position to focus on containing inflation. With a 64 percent chance of a rate hold and a 36 percent probability of a hike, investors are pricing in a potential Fed stance. Despite being typically viewed as an inflation hedge, higher interest rates typically reduce gold's appeal due to its non-yielding nature.

In response to geopolitical developments, Bessent announced that the United States would impose "the toughest sanctions in history" on Iran. Spot silver, platinum, and palladium also experienced gains, with silver up 1.3 percent to $68.92 per ounce, platinum climbing 2.4 percent to $1,872.64, and palladium rising 1.3 percent to $1,351.28.