Gold rises to 3-month high as Treasury moves, trade tensions lift bullion demand

Gold prices surged to a three-month high on Tuesday, bolstered by the U.S. Treasury's surprise intervention in the bond market and rising trade tensions. As of 20:59 ET, XAU/USD reached $4,688.96 per ounce, while Gold Futures rose 1% to $4,746.09. XAG/USD gained 0.8% to $69.51, and XPT/USD increased 0.5% to $1,889.32. The U.S. Dollar Index remained stable at 98.98.

Gold has gained over 7% in four sessions, extending gains from the previous week and surpassing the $4,600 mark. This surge was primarily fueled by the Treasury's decision to increase buybacks of longer-dated government debt, which lowered bond yields and weakened the dollar, making gold more affordable for overseas buyers. The move has also rekindled concerns about the U.S. government's fiscal situation and the potential weakening of the dollar due to efforts to control borrowing costs.

Treasury Secretary Scott Bessent has expressed readiness to expand buybacks of longer-dated debt, although no further details were provided on Monday. The administration will soon unveil a fiscal initiative to address high government borrowing costs, further fueling the "debasement trade." Gold's technical indicators have improved, with the metal now trading above its 200-day moving average, a key sign of long-term momentum.

The U.S. has threatened economic sanctions against countries engaging with Iran, while the U.S.-Canada trade dispute escalated after talks failed. Washington imposed 50% tariffs on some Canadian goods and threatened the same rate on Canadian cars, trucks, and auto parts starting January 2027. These factors are testing gold's role as a portfolio diversifier amid fiscal concerns, trade friction, geopolitical risk, and uncertain monetary policy.

Tony Sycamore, a senior market analyst at IG, noted that gold has likely formed a base at the late-June low near $3,942. The recent advance suggests the rally is likely to continue, with support at trendline resistance around $4,420 and the 200-day moving average at $4,515. Sycamore anticipates dips will attract buyers as gold approaches the next major resistance zone between $4,900 and $5,000.