Gold futures slipped on Wednesday after Treasury buyback plans for long-term debt pressured U.S. yields higher, while escalating Middle East tensions and upcoming Federal Reserve communications weighed on the yellow metal.
The U.S. Treasury said it would at least double the size of its buyback operations for long-term notes and bonds, a move aimed at improving bond market liquidity rather than addressing acute stress. The announcement contributed to a rise in Treasury yields, which reduced gold’s relative attractiveness as non-yielding bullion competes with interest-bearing assets. Earlier in the week, gold had surged after the 10-year Treasury yield briefly touched a near two-decade high, but the metal remained under pressure as yields stayed elevated.
Oil prices also climbed amid ongoing Middle East tensions, adding another headwind for gold. Higher energy costs risk sustaining inflation, potentially delaying expected Federal Reserve rate cuts or keeping borrowing costs elevated for longer. The Strait of Hormuz, a critical chokepoint for global oil and liquefied natural gas flows, remains a flashpoint, with about one-fifth of seaborne energy transits passing through the waterway before the Iran war began in late February.
Geopolitical developments compounded the risks. The United Arab Emirates suspended all trade with Iran indefinitely following reports of ballistic missiles landing in the sea near maritime routes. Iran denied involvement, while NATO reiterated its readiness to address any threats after reports suggested Iran may consider attacking U.S. military targets in Europe if tensions escalate further. Iran’s parliament speaker claimed the U.S. seeks an “honourable exit” from the Middle East, signaling no imminent de-escalation.
Technically, gold futures had briefly tested a key support level at the 200-day moving average ($4,379) before rebounding to an intraday high of $4,557.30. As of Wednesday’s settlement, the contract traded at $4,552.15. The analysis suggests the recent rally could face reversal risks, particularly around the release of the Federal Open Market Committee (FOMC) minutes later in the day. A pullback following the minutes could accelerate selling pressure through the weekly close, with investors expected to refocus on Fed Chair Kevin Warsh’s remarks at the Jackson Hole symposium next week.
