Gold regained ground during US trading on Thursday, climbing back above the $4,500 level as investors assessed the impact of higher US Treasury yields, a steadier dollar and renewed concerns over government debt and fiscal uncertainty.
XAU/USD was trading near $4,522 at the time of writing, recovering significantly from an intraday low of $4,456. The rebound came despite a recovery in US Treasury yields and relative stability in the US Dollar, both of which can weigh on non-yielding assets such as gold.
The precious metal had surged more than 4% on Wednesday following news that the US Treasury Department would increase liquidity-support purchases of longer-dated government securities.
The announcement triggered a sharp decline in Treasury yields. The benchmark 10-year Treasury yield fell by about 5 basis points to 4.63%, while the 30-year yield dropped approximately 9 basis points to 5.18%.
The move offered temporary relief to the bond market after the 30-year yield had climbed above 5.30% earlier in the week, reaching its highest level since 2007.
However, the relief proved short-lived. Both the 10-year and 30-year Treasury yields were higher by roughly 6 basis points on Thursday, putting renewed pressure on markets and helping explain some of gold’s intraday volatility.
Fiscal Concerns Keep Gold Supported
While Treasury buybacks could help ease liquidity pressures in the bond market in the near term, analysts warn that they do not resolve the deeper challenges facing US government finances.
Large fiscal deficits, substantial government debt issuance and persistent inflation concerns remain key risks for investors.
Those concerns are providing an underlying source of support for gold, which is widely regarded as a hedge against inflation, currency risks, debt concerns and broader financial uncertainty.
US Treasury Secretary Scott Bessent said Thursday that the government’s bond buyback programme could exceed $4 billion, potentially providing additional support to longer-dated Treasury securities.
For gold investors, however, the broader question remains how US monetary policy will evolve as markets balance inflation risks against economic growth and financial-market stability.
Fed Outlook Remains Crucial for Gold
Gold’s next major move is also likely to depend heavily on expectations for Federal Reserve interest-rate policy.
Analysts at TD Securities said the Treasury’s intention to support the longer end of the government bond market, combined with a Federal Reserve that is prepared to look beyond higher energy prices, could provide near-term support for gold.
“The signal of the Treasury looking to support the longer end, alongside a Fed willing to look past higher energy prices, should be enough to support the yellow metal in the near-term,” the analysts said.
However, they warned that another major advance in gold could take time.
“With the market still pricing in hikes for 2027, the next leg higher for Gold is unlikely to materialize before the broader market becomes more convinced that the Fed remains on hold,” TD Securities analysts added.
Market expectations have shifted noticeably in recent weeks. According to the CME FedWatch Tool, investors currently see a 65% probability that the Federal Reserve will leave interest rates unchanged in September, up sharply from about 35% a month earlier.
That expectation could remain an important driver of gold prices, particularly if investors continue to believe that borrowing costs will remain elevated for longer.
Fed Official Says Bond Yields Do Not Dictate Policy
San Francisco Federal Reserve President Mary Daly sought to separate movements in Treasury yields from the central bank’s policy decisions.
“Rising bond yields don’t give a signal for policy,” Daly said Thursday, adding that Fed policy “is in a good place.”
She also said that “short-term yields show markets understand the Fed’s reaction function,” while emphasizing that the central bank “really has to focus on achieving its inflation target.”
Her comments underline the Fed’s continued focus on inflation as it determines the appropriate level of interest rates.
For gold traders, a prolonged period of restrictive monetary policy could limit the metal’s upside because higher interest rates increase the opportunity cost of holding an asset that does not generate interest.
At the same time, expectations of eventual monetary easing, persistent inflation or increased financial uncertainty could strengthen demand for the precious metal.
Dollar Recovers as Jobless Claims Beat Expectations
US economic data provided some support for the dollar on Thursday.
Initial Jobless Claims fell to 206,000, beating market expectations of 210,000 and declining from the previous reading of 212,000, which was revised upward from 209,000.
The stronger-than-expected labour-market reading helped the US Dollar Index (DXY) recover from an intraday low of 98.56.
The index was trading around 98.80, although it remained well below recent highs.
A stronger dollar can make gold more expensive for international buyers and typically creates downward pressure on dollar-denominated bullion. Thursday’s recovery in the Greenback therefore helped limit gold’s gains even as the metal remained above the $4,500 threshold.
Gold Tests Key 200-Day Moving Average
From a technical perspective, gold continues to maintain a broadly constructive near-term outlook.
On the daily chart, XAU/USD remains above its 50-day Simple Moving Average at $4,164 and its 100-day SMA at $4,380, reinforcing the underlying bullish structure.
The metal is now trading close to its 200-day SMA at $4,512, a widely watched technical level that could determine its next major direction.
Momentum indicators are also supportive. The Relative Strength Index (RSI) is near 65, indicating strong buying momentum without yet reaching traditionally overbought territory.
Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains positive, further pointing to continued upside momentum.
A sustained daily close above the $4,512 200-day SMA could strengthen the bullish case and expose the next major resistance level around $4,650.
On the other hand, failure to hold above the 200-day average could trigger renewed selling pressure.
The $4,380 100-day SMA represents the first major support level, followed by the $4,164 50-day SMA. Below those levels, the psychologically important $4,000 mark could become the next area of focus.
With Treasury yields, Federal Reserve expectations and the dollar all moving in response to incoming data and policy signals, gold is likely to remain highly sensitive to developments in US financial markets in the sessions ahead.