Spot gold price is close to 4,500 USD/ounce after falling to around 4,350 USD/ounce in the trading session on August 19.
Gold's upward momentum is supported by new developments in the US bond market.
This is a completely unexpected and positive development for gold, because long-term US Treasury bond yields fell, while the USD weakened" - Mr. Robert Gottlieb - an expert quoted by Reuters.
The yield on 30-year US Treasury bonds fell sharply on Wednesday, leaving a 19-year high, after the US Treasury Department said it would increase the scale of long-term debt buybacks to support market liquidity.
According to the plan, the repurchase scale will be increased from a maximum of 2 billion USD to at least 4 billion USD per round. It is expected that 7 repurchases will be carried out in the period from September 9 to November 4, applicable to bonds with a term of 10 to 30 years.
This move contributes to pulling long-term bond yields down, thereby reducing the opportunity cost of holding gold – an asset that does not yield interest.
Along with that, the USD index fell 0.8%, making gold more attractive to investors holding other currencies.
TD Securities believes that interest in gold investment has declined recently, but cash flow may quickly return as the market receives liquidity support signals from the US Treasury Department.
According to this organization, the above factors, along with the prospects of monetary policy, may create conditions for real interest rates to decrease in the near future - a development that is often beneficial for gold prices.
However, the market is still closely monitoring the Fed's interest rate outlook. The minutes of the policy meeting held on July 28-29 show that some Fed officials support interest rate hikes, while many others also leave open the possibility of further tightening policies if inflation does not return to the 2% target.
According to CME Group's CME FedWatch tool, the market currently assesses the probability of the Fed keeping interest rates unchanged at the meeting on September 15-16 at around 65%. A series of weaker-than-expected US economic data recently has made forecasts about the possibility of the Fed continuing to raise interest rates fall.
The diễn biến of bond yields, the strength of the USD and new signals about the Fed's monetary policy are forecast to continue to be important factors dominating the upward momentum of gold prices in the coming time.
