Gold rallies past three-month high as Treasury buyback and weak dollar boost demand

Gold prices surged on Monday to reach their highest level in over three months. A potent combination of technical buying, a softer U.S. dollar, and recent policy announcements from the U.S. Treasury pushed precious metals higher across the board.

Traders are now tuning in closely for upcoming U.S. inflation figures and the Fed's annual Jackson Hole gathering.

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Dollar weakness and Treasury policy drive gains

Spot gold jumped 1.5% to reach $4,673.20 per ounce by mid-day trading, marking its highest point since May 14. U.S. gold futures for December delivery also advanced, climbing 1.1% to hit $4,730.40 per ounce.

Bullion has gained significant traction since last week, jumping over 5% after the U.S. Treasury Department announced a bond buyback support plan. The announcement dragged the greenback down toward multi-month lows, making dollar-denominated gold far more attractive to international investors.

Market sentiment turned firmly bullish after gold broke above its 200-day moving average last week, triggering technical momentum. Bond yields have also stabilized and dipped slightly, providing a strong tailwind for non-yielding bullion.

Institutional appetite is mirroring the price action. According to data from the World Gold Council, gold-backed ETFs recorded massive inflows of 46.7 metric tons ($6.4 billion) last week, marking their strongest weekly demand surge in 10 months. North American and European funds spearheaded the wave of buying.

Investors parse Fed signals and upcoming inflation data

Market participants are currently waiting on updates from U.S. Treasury Secretary Scott Bessent regarding potential sanctions related to Iran, following his earlier press conference scheduling.

At the same time, traders are positioning themselves for critical macroeconomic updates later in the week. Focus remains locked on Wednesday's Personal Consumption Expenditure price index, which serves as the Federal Reserve's preferred inflation metric.

Investors will also parse Chair Kevin Warsh's debut address at the Jackson Hole Symposium on Friday to evaluate the central bank's interest rate trajectory.

The broader metals market followed gold's lead according to Reuters data. Spot silver edged up 0.2% to $69.06 per ounce, platinum added 0.8% to reach $1,892.03, and palladium gained 1.8% to land at $1,374.27.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)