Gold Prices Hit Mid-May Highs Amid US Treasury Buybacks and Inflation Focus

Gold prices rose on Tuesday, extending a rally driven by the U.S. Treasury's recent buyback announcement. Market focus has now shifted toward upcoming U.S. inflation data and an upcoming speech by Federal Reserve Chair Kevin Warsh to gather clues regarding future interest rates.

Spot gold increased by 0.6 per cent to $4,676.75 per ounce as of 0026 GMT, after touching its highest level since May 14 earlier in the session. Meanwhile, U.S. gold futures rose by 0.8 per cent to $4,734.50.

Prices experienced a sharp upward movement last week after the U.S. Treasury Department announced it would double the size of liquidity support buyback operations for longer-dated notes and bonds.

Traders are closely watching economic indicators, with the U.S. Personal Consumption Expenditures report—the Federal Reserve's preferred inflation gauge—scheduled for release on Wednesday. Additionally, Federal Reserve Chairman Warsh's debut speech at the annual Jackson Hole conference has gained added weight as analysts look for guidance on recent bond yield jumps and reassurance regarding institutional independence.

Financial institutions have responded to the market shifts, with Citi raising its zero-to-three-month gold price target on Monday to $4,800 an ounce, noting that the rally still has room to run. The bank maintained its six-to-12-month target at $5,000, pointing to an eventual easing of tensions around the Strait of Hormuz, lower real interest rates, and a less hawkish Federal Reserve.

Geopolitical factors also played a role as the U.S. unveiled an expanded set of sanctions aimed at cutting off Iran's economic lifeline, stopping short of the most punishing measures while putting the global market on notice regarding business with the Islamic Republic.

In operational developments elsewhere in the sector, Ghana's artisanal gold marketing agency GoldBod has reportedly failed to provide funds to its gold suppliers for up to three weeks, prompting some operators to halt purchases or take on debt to remain operational, according to industry sources.

Across other precious metals, spot silver gained 0.5 per cent to reach $69.29 per ounce. Platinum rose by 0.3 per cent to $1,880.78, while palladium firmed by 0.2 per cent to $1,359.14 per ounce.

"Precious metals markets are reacting directly to macroeconomic shifts, particularly liquidity adjustments by the U.S. Treasury and evolving monetary policy expectations. For businesses and investors, these currency and commodity fluctuations underscore the importance of maintaining robust risk management strategies during periods of shifting interest rates and geopolitical adjustments." — Dr. Shishir Gupta, Founder & CEO, StartupLanes