Gold is holding near a more-than-three-month high, supported by a weaker U.S. dollar and plans by the U.S. Treasury to buy back longer-dated government bonds. Spot gold fell 0.4% to $4,634.35 an ounce on Tuesday, while futures slipped 0.1% to $4,691.70. The metal is up more than 15% this month.
The dollar index has fallen 0.8% in August, making gold cheaper for buyers using other currencies. Treasury yields have also eased, with 10-year yields down about 3 basis points this month. Lower yields reduce the opportunity cost of holding gold, which does not pay interest.
Investors are now turning to the Federal Reserve and this week’s Jackson Hole gathering. Fed Chair Kevin Warsh is due to speak later in the week, with markets looking for clues on the path for interest rates. A hawkish message could put the brakes on gold’s rally by supporting the dollar and Treasury yields.
A dovish surprise, however, could give gold another leg higher. Citi says a softer Fed stance could push markets to further price out rate hikes while reviving concerns about Fed independence and U.S. debt sustainability. With gold already on track for its strongest monthly gain since 1999, the Jackson Hole message could be the next major catalyst.
