RESOLVING THE LEDGER
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See the full story · 2 sourcesGold prices climbed Friday, putting bullion on course for a gain of nearly 5% this week, as bond market jitters, a softer dollar and renewed concerns over U.S. debt helped revive demand for the precious metal.
Gold futures rose 1.67% to $4,647.70 in early trading Friday, while spot bullion prices notched a 1.55% gain, trading at $4,588.08. The advance caps a positive week for the precious metal, which is up 4.7% over the five-day period, with futures moving toward a three-month high.
The rebound follows gold's sharp reversal from record highs of almost $5,600 earlier this year, and its worst quarterly perfomance since 2013 in the three months through June.
Spot gold. Giovanni Staunovo, commodity analyst at UBS , said rising debt levels globally, coupled with sustained weakness in the dollar, underpinned gold's surge last year — and now those concerns are returning.
"[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.
The Treasury Department said Wednesday it would at least double the size of liquidity-support buybacks for 10- to 30-year government debt, an effort to stabilize a selloff in longer-dated Treasurys. The announcement initially pushed Treasury yields lower and weakened the dollar, sending gold prices higher.
The buyback plan landed just as U.S. government debt topped $40 trillion for the first time ever.
Diane Garrett, executive chairman and CEO of Hycroft Mining , said markets appear to now be reading the the moves as a signal that the debt load's cost and duration will now be a key factor shaping policy.
"That's exactly the kind of structural, long-term driver gold investors are underwriting," Garrett told CNBC via email. "It also tracks with why central banks keep rotating reserves out of Treasuries and into gold."
The World Gold Council's annual Central Bank Gold Reserves Survey , published in June, found that 89% of respondents expect global central bank gold reserves to increase over the next year. A record 45% expect their own institutions' holdings to rise, while 1% expect them to decline.
"While this does add a degree of volatility, we think it's supportive of the underlying demand trends for precious metals," Garrett added.
Gold futures. "Short-term moves like this week's announcement by Treasury Secretary Scott Bessent will keep driving volatility in the gold price, and tensions in the Middle East will add to that. However, the structural picture hasn't changed," said Theo Botoulas, CEO of Neo Energy Metals , a South Africa-focused gold and uranium developer.
"Annual gold consumption is running at record levels of almost 5,000 [metric] tons per annum. At the same time, supply increases by little more than 1.5% annually, providing a favorable backdrop for the market."
However, analysts conceded that headwinds remain, with Staunovo flagging higher oil prices caused by the ongoing Middle East conflict as a potential pressure point.
"More expensive energy could add to inflation pressures and keep central banks more cautious about lowering interest rates, potentially supporting bond yields and weighing on the non-yielding metal," Staunovo said.
Rhona O'Connell, head of market analysis for EMEA and Asia at StoneX, said upward pressure on yields is expected to return given the strength of the U.S. economy.
"On balance, gold has to weigh up the headwinds of high, and likely continued rising, Treasury yields against the tailwinds of a weaker dollar — and don't forget the Gulf. Much of this already priced in and gold may now need yet another breather."
Dollar Index. David Morrison, senior market analyst at Trade Nation, said the latest rebound could leave gold vulnerable to a near-term pullback.
"While this move in gold is impressive, especially given its 10% rally off multi-month lows since the end of last month, it may be a case of too far, too quickly. Prices may have to back up and fill in now for gold to make further gains," Morrison said.
"But even if gold were to drop back to $4,400, if it could find support there, that would be a positive sign for the bulls. Even more so should the U.S. dollar continue to decline," he added.
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