Gold prices slipped on Thursday as investors engaged in profit-taking after climbing to a more-than-two-month peak. The initial surge followed a surprise US Treasury liquidity-support announcement for long-duration bonds, which weakened the dollar and pushed Treasury yields lower.
Spot gold declined by 0.6 per cent to $4,495.69 per ounce by 0331 GMT. Earlier in the session, it touched $4,525.79, marking its highest level since June 2, following a more than 4 per cent advance on Wednesday. Conversely, US gold futures rose 0.2 per cent to $4,553.30.
The market movement came after the US Treasury Department announced on Wednesday that it would double the size of liquidity support buyback operations for longer-dated notes and bonds. This policy shift followed a major bond selloff, where investors demanded higher returns amid increased inflationary risks stemming from the US-Israeli war on Iran. Concurrently, the US dollar hovered near three-month lows.
Ilya Spivak, head of global macro at Tastylive, noted that the market experienced a massive rally that naturally warranted a period of digestion. He added that the $4,400 to $4,500 price range has been cleared, and if prices hold above this range, upward momentum is likely to continue.
Adding to macroeconomic pressures, total US debt outstanding topped $40 trillion for the first time, drawing fresh warnings regarding a fiscal crisis. Edward Meir, an analyst at Marex, stated that increasing concerns about market financial stability, high borrowing and debt levels, and the inability to cut spending on the fiscal side remain very bullish for gold.
Meanwhile, concerns regarding inflation deepened at the Federal Reserve’s meeting last month. Minutes from the session showed that several policymakers were ready to raise interest rates. According to the CME FedWatch Tool, traders are currently pricing in a 67 per cent chance of a Federal Reserve hold and a 33 per cent chance of a rate hike in September. While gold functions as a traditional hedge against inflation, higher interest rates typically diminish the appeal of non-yielding bullion.
In other precious metals, spot silver gained 0.2 per cent to $67.07 per ounce, platinum dropped 1.3 per cent to $1,802.29, and palladium slid 0.2 per cent to $1,328.06.
"The recent movement in gold prices highlights how quickly macroeconomic policy shifts and fiscal concerns impact global financial markets. With US debt surpassing $40 trillion and ongoing discussions around Federal Reserve interest rate policies, investors are closely balancing inflation hedges against yield pressures. For businesses and entrepreneurs, monitoring these global monetary trends is essential, as currency fluctuations and commodity shifts directly influence broader economic stability and capital costs." — Dr. Shishir Gupta, Founder & CEO, StartupLanes
