Gold prices have touched the highest level since mid-May, extending a rally driven by the US Treasury's recent buyback announcement and building buying momentum. According to The Hindu BusinessLine, spot gold was up 0.6% at $4,676.75 per ounce as of 0026 GMT, after hitting its highest since May 14 earlier in the session. US gold futures rose 0.8% to $4,734.50, maintaining its position near a three-month high. The rally has been fueled by news of Treasury buybacks, with prices rising sharply last week after the US Treasury Department said it would double the size of liquidity support buyback operations for longer-dated notes and bonds. The market's focus has shifted to significant US inflation data and a speech later this week by Federal Reserve Chair Kevin Warsh for clues on interest rates, with the US Personal Consumption Expenditures report, the Fed's preferred inflation gauge, due on Wednesday. The unexpected move has revived concerns about rising borrowing costs and exerted downward pressure on the dollar, making gold that's priced in the currency cheaper for many buyers.
Gold futures opened higher on MCX with the benchmark October contract opening at ₹1,63,202 per 10 gram, up ₹320 from the previous close of ₹1,62,882. At the time of writing, the contract was trading at ₹1,63,136, up ₹254, during the session touching a high of ₹1,63,202 and a low of ₹1,62,021. Gold futures had touched their highest level of the year at ₹1,80,779. Silver futures also opened higher with the benchmark September contract on MCX opening at ₹2,45,583 per kg, up ₹1,456 from the previous close of ₹2,44,127. At the time of writing, the contract was trading at ₹2,45,700, up ₹1,573, during the session touching a high of ₹2,46,180 and a low of ₹2,45,430. Silver futures had touched their highest level of the year at ₹4,20,048 per kg.
The US Department of the Treasury announced last Wednesday that it would at least double buyback operations for long-dated government debt starting in September, as reported by Business Standard. However, investors continue to monitor the effectiveness of this strategy, with long-dated yields jumping this week as the 30-year yield reached its highest level since 2007. As reported by Reuters, traders cited concerns over the deteriorating fiscal outlook, heavy issuance, geopolitical risk stemming from the war with Iran, and uncertainty over the Federal Reserve's policy path. According to The Hindu BusinessLine, the buyback plan landed just as U.S. government debt topped $40 trillion for the first time ever, adding to investor concerns about the debt load's cost and duration. The US unveiled an expansion of sanctions that it said would cut off Iran's economic lifeline but stopped short of the most punishing measures, instead putting the world on notice to cease doing business with the Islamic Republic.
Citi raised its zero-to-three-month gold price target on Monday to $4,800 an ounce and said the rally still had room to run, according to The Hindu BusinessLine. The investment bank kept its six-to-12-month target at $5,000, citing an eventual easing of tensions around the Strait of Hormuz, lower real interest rates and a less hawkish Fed. Giovanni Staunovo, commodity analyst at UBS, said rising debt levels globally, coupled with sustained weakness in the dollar, underpinned gold's surge. "[That] should lift the price of gold to $5,400 per ounce over the next 12 months, in our view," Staunovo told CNBC via email. In a sign of wider investor participation, bullion-backed exchange-traded funds tracked by Bloomberg added more than 28 tons last week, the most since January.
In the international market, gold was trading near $4,700 per ounce on Comex, while silver was around $69 per ounce. On Comex, gold opened at $4,715.70 per ounce, up from the previous closing price of $4,694.50, and at the time of writing was trading at $4,705.40 per ounce, up $10.90. Gold prices had touched their highest level of the year at $5,586.20 per ounce. Comex silver futures opened at $68.63 per ounce, up from the previous closing price of $68.68, and at the time of writing was trading at $69.18 per ounce, up $0.50. Silver prices had touched their highest level of the year at $121.79 per ounce. The U.S. dollar struggled to hold onto gains against major peers on Tuesday, as investors parsed Washington's expanded Iran-related sanctions and renewed efforts to ease pressure on longer-dated Treasury yields.
