World gold prices on August 20 continued to rise sharply, maintaining the largest increase in about 6 months after new information from the US bond market supported the upward momentum of the precious metal.
Spot gold prices increased by 2.86%, to 4,490.18 USD/ounce. Previously, gold prices at one point exceeded 4,500 USD/ounce after increasing by more than 4% in the previous session. December gold futures contracts increased by 0.09%, to 4,549.24 USD/ounce.
The strong increase in gold occurred after the market received information that the US Treasury Department increased the scale of long-term government bond repurchases to support market liquidity.
This move is expected to contribute to supporting the bond market and improving financial conditions after long-term yields rose to highs for decades. More favorable financial conditions could reduce the opportunity cost of holding gold – an asset that does not yield interest.
However, gold's outlook is still affected by inflation and monetary policy developments. Energy prices remain high, raising concerns that inflationary pressure could prolong and cause interest rates to remain high longer.
The minutes of the Fed's July monetary policy meeting released on August 19 show that some officials are still open to supporting interest rate hikes if inflation does not continue to improve. High interest rates often put pressure on gold as they increase the opportunity cost of holding unprofitable assets.
Meanwhile, Bloomberg's USD strength index was almost flat after falling 0.8% in the previous session, thereby not creating significant pressure on the price of precious metals.
On other precious metals markets, spot silver prices fell slightly 0.06%, to 66.9715 USD/ounce. Platinum prices fell 1.02%, to 1,803.39 USD/ounce, while palladium prices fell 0.82%, to 1,331 USD/ounce.
In the energy market, oil prices continued to remain at a high level. Brent oil increased by 0.36%, to 91.95 USD/barrel, while WTI oil increased by 0.23%, reaching 84.58 USD/barrel.
