Gold holds above $4,500 as weaker dollar, Treasury buybacks boost weekly gains now

Gold prices continued their upward trend on Friday, remaining firmly above the $4,500-an-ounce mark and on track for a third consecutive weekly gain. The rally has lifted the metal by approximately 4% for the week, with analysts projecting a more than 11% increase for August. At 22:12 ET, XAU/USD climbed to $4,520.71 per ounce, while Gold Futures rose 0.1% to $4,576.51.

Meanwhile, XAG/USD increased by 0.5% to $68.43 an ounce, and XPT/USD surged 1.7% to $1,867.71. The U.S. Dollar Index fell 0.1% to 98.77. Gold has maintained most of its gains from the week, as it successfully broke above the $4,500 threshold for the first time since the recovery began. The metal is now poised for a third straight weekly rise, following a significant rebound from the late-June low of $3,942.

This surge is primarily driven by developments in U.S. bond markets, with the Treasury doubling buybacks of longer-dated Treasury securities to at least $4 billion per operation over the next quarter. This move has contributed to lower long-term yields, making gold more attractive to investors seeking income alternatives to bonds.

The weaker U.S. dollar has also played a role, as it makes gold more affordable to investors holding other currencies. Additionally, the latest U.S. labor data, showing a slight decrease in weekly jobless claims, has further bolstered investor confidence in the Federal Reserve's ability to control inflation. Despite these positive factors, higher interest rates could still weigh on gold, as they increase the return from interest-bearing assets.

Fed officials are cautious about the Treasury's debt-management strategy and its potential impact on financial conditions. Geopolitical tensions, particularly the announcement of the toughest sanctions ever imposed on Iran, have added another layer of support for gold. As investors seek diversification away from the dollar and U.S. assets, gold has emerged as a compelling option.