Gold gains momentum above $4,600 on US Treasury buyback plans

Gold prices climbed above $4,600 in early Asian trading hours on Monday, reaching its highest level since May 15. This surge was driven by the U.S. Treasury's plan to support longer-dated securities, which weighed on the U.S. Dollar (USD) and reduced its attractiveness. U.S. Treasury Secretary Scott Bessent indicated that the government might increase bond buybacks beyond $4 billion, contributing to the decrease in Treasury yields and the weakening of the USD.

As gold is priced in USD, a weaker currency makes it more appealing for foreign buyers. Bart Melek, global head of commodity strategy at TD Securities, noted that the primary factor behind gold's rise was the drop in the U.S. dollar. However, concerns related to energy-driven inflation and ongoing tensions in the Middle East may lead to potential Federal Reserve (Fed) rate hikes, which could cap gold's upside.

Iran's Foreign Minister, Abbas Araghchi, dismissed the threat of new U.S. economic sanctions as a "desperate" move and claimed they would fail to affect Tehran. The U.S. President recently announced a campaign to increase pressure on the Iranian economy. Technical analysis suggests that gold has a bullish near-term bias, with price holding above the 100-day simple moving average and the Bollinger middle band.

The asset remains susceptible to various factors, including geopolitical instability or recession fears, which can lead to increased demand due to its safe-haven status. Central banks are among the largest holders of gold, using it as a store of value and hedge against inflation and currency depreciation.