Gold surged more than 4% to around $4,519 per ounce on Wednesday after the U.S. Treasury announced plans to increase the size of its long-term debt buyback operations to support market liquidity.

The move pushed long-term U.S. Treasury yields lower, while the U.S. dollar fell to a three-month low, providing additional support for precious metals.

U.S. Treasury Expands Long-Term Bond Buybacks

The U.S. Treasury said it would at least double the size of its liquidity-support buyback operations for securities in the 10-year to 30-year maturity range.

Following the announcement:

• The 30-year U.S. Treasury yield fell by as much as 10 basis points to around 5.18%

• The 10-year Treasury yield dropped about 6 basis points to 4.65%

Meanwhile, shorter-term yields, including the 3-month, 6-month, and 2-year maturities, moved higher.

This suggests that the yield curve is changing shape rather than borrowing costs falling across the entire Treasury market.

Precious Metals Rally Strongly

The reaction across precious metals was significant.

Gold rose 4% to around $4,518.90 per ounce, reaching an intraday high of $4,524.50.

Other precious metals also posted strong gains:

• Silver: +5.34% to $66.57

• Palladium: +4.18%

• Platinum: +6.14% to around $1,815

By contrast, industrial metals such as copper, nickel, zinc, and aluminum declined. This suggests that buying interest was concentrated more heavily in metals viewed as stores of value rather than those driven primarily by industrial demand.

Fed and Treasury Send Mixed Signals

On the same day, minutes from the Federal Reserve’s July meeting showed that several officials still supported the possibility of further rate hikes if inflation failed to ease.

While the Fed continues to leave the door open to tighter monetary policy, the Treasury’s buyback program is putting downward pressure on long-term yields.

Markets are currently leaning toward a more cautious Fed outlook. According to CME FedWatch, the probability of a September rate hike has fallen to around 36%, down sharply from more than 70% at the end of July.

Key Technical Levels for Gold

According to James Dima of StoneX, traders are closely watching two important levels in December gold futures.

The first is around $4,540, which corresponds to the 50-week moving average. A weekly close above this level could attract renewed momentum buying.

The next key level is near $4,625, around the 200-day moving average.

Meanwhile, gold has already broken above the important $4,500 threshold. Ole Hansen of Saxo Bank previously noted that if prices can hold above this level, the market could reopen the path toward $5,000, provided macroeconomic conditions remain supportive.

Conclusion

Gold’s strong move above $4,500 per ounce reflects a combination of three major factors: lower long-term Treasury yields, a weaker U.S. dollar, and declining expectations for further Fed rate hikes.

However, the breakout still needs confirmation at key technical levels, particularly around $4,540 and $4,625.

In the near term, markets will continue to monitor U.S. Treasury yields, Federal Reserve policy, and gold’s ability to hold above $4,500 to determine whether this breakout can develop into a more sustained bullish trend.

This article is for informational and market analysis purposes only and does not constitute investment advice.

Source: Kitco