Gold Climbs Above $4,500 As US Dollar, Yields Fall

Gold price (XAU/USD) rises to around $4,520 during the early Asian session on Thursday. The precious metal surges to the highest since early June amid the weakening US Dollar (USD) after the US Treasury Department stepped in to provide relief to bond markets.

The Treasury Department is ramping up a buyback program for longer-dated securities to rein-in long-term borrowing costs from multi-year highs. The department announced that it would at least double the maximum size of its liquidity-support buyback operations for longer-dated nominal securities. The current maximum size of $2 billion per operation will be at least $4 billion per operation. 

TD Securities said the Treasury's announcement gave metals a "jolt of life," saying gold investment could "quickly return amid Treasury liquidity support, a Fed willing to look through an energy shock, and a growing stagflation narrative, which should all ultimately see lower real rates.”

The Federal Reserve's (Fed) latest July meeting minutes indicated many policymakers saw rate hikes likely if inflation did not decline. The Fed decided to keep the Federal Funds Rate targeted in a range between 3.5%-3.75% last month, with dissenters focusing on the need for action soon to return inflation to target.

Nonetheless, traders are largely looking through this due to rising stagflation fears and an energy shock narrative, driving money back into gold as a safe-haven. 

Gold upside seen as US Treasury support points to lower real rates

According to TD Securities, the recent moderation in the “fierce bid” for Gold may prove temporary, with the bank arguing that “the flows could quickly return amid Treasury liquidity support, a Fed willing to look through an energy shock, and a growing stagflation narrative, which should all ultimately see lower real rates.” In their view, this combination of renewed US Treasury buybacks, a tolerant Fed stance on energy-driven price pressures, and rising stagflation concerns reinforces the case for renewed upside in precious metals.

Technical Analysis: Gold resumes its uptrend in the near term

In the daily chart, XAU/USD retains a bullish near-term bias as price holds well above the 20-period Bollinger simple moving average and the 100-day simple moving average (SMA), keeping the broader uptrend intact. Price is approaching the upper Bollinger band, while the Relative Strength Index (14) around 67 points to overbought conditions that could temper immediate upside, even as momentum still favors buyers.

On the topside, initial resistance is located at the upper Bollinger band near $4,550, where a clear daily close above would open the way to fresh record territory. On the downside, immediate support is seen at the 100-day SMA around $4,380, followed by the mid-Bollinger band at $4,225, with the lower Bollinger band at $3,905, marking a more distant structural floor in the event of a deeper corrective pullback.