Gold futures slipped on Tuesday after briefly touching a record intraday level, as a rebound in the U.S. dollar triggered profit-taking in the precious metal that has surged 36.64% over the past year. Spot gold last traded at $4,634.90, down 0.34% on the session, after printing an all-time intraday high of $4,696.98 overnight. The metal had gained 13.73% over the past month alone, including a 5% advance last week, driven by a sharp drop in long-term Treasury yields following the U.S. Treasury’s announcement of an expanded bond buyback program.
The Treasury said on August 19 it would double its buybacks of long-dated debt to at least $4 billion per operation, with the first operation scheduled for September 9. While the program’s scale remains modest relative to the $40 trillion U.S. debt stock, the announcement signaled a shift in fiscal policy, with the Treasury indicating it would fund purchases from the Treasury General Account—a $950 billion cash reserve at the Federal Reserve—rather than through short-term bill issuance. The move has been interpreted as a signal that long-end yields are now a policy target, prompting a broad-based rally in gold.
The dollar index, which had fallen to a three-month low of 98.55 on August 22, rebounded to 98.693 on Tuesday, capping gold’s advance. The euro, which accounts for 57.6% of the dollar index, contributed to the majority of the decline in the greenback. The correlation between gold and the dollar index has been near-perfect in recent sessions, with bullion trading inversely to the index almost tick-for-tick through the London fix.
Silver, which typically exhibits higher volatility than gold, declined 1.36% to $67.90, underperforming the precious metal as the leveraged complex unwound some of its gains. The divergence between gold and silver is a common feature of profit-taking in risk assets, analysts noted.
The rally in gold has occurred despite rising real yields, which have climbed to 4.658% for the 10-year and 5.23% for the 30-year, levels not seen since 2007. Traditional models suggest gold should weaken in a rising real-rate environment, as the opportunity cost of holding a non-yielding asset increases. However, the analysis suggests the metal’s advance has been driven by two factors not captured by the traditional model: central bank accumulation and a market reassessment of the dollar’s reserve status.
Looking ahead, the dollar’s trajectory remains the key determinant for gold. A sustained break below 98.55 could open the door to further gains, as the last time the index fell below that level, gold rallied to $4,696 within four sessions. Conversely, a move back above 99.50 could signal a deeper correction, while a rise above 100.00 would call into question the durability of the August advance. Analysts will also watch for any hawkish signals from the Federal Reserve’s Jackson Hole symposium later this week, which could lift the dollar and push gold toward $4,500.
