Gold Prices Retreat as US Yields Rebound After Treasury Buyback

Gold prices fell on Thursday after touching a more than two-month high, pressured mainly by a rebound in US Treasury yields. Earlier, the US Treasury announced an expansion of long-dated Treasury buyback operations, which briefly drove yields lower and boosted gold prices, but the market quickly digested the news, with yields paring losses and pressuring non-yielding gold. Meanwhile, a rebound in the US dollar index also intensified the short-term pullback in precious metals.

**Treasury Intervention Effect Short-Lived**

Earlier this week, the US Treasury unexpectedly doubled the size of certain liquidity support operations tied to long-dated Treasuries, which the market interpreted as a de facto "fiscal version of yield curve control." This initially triggered a sharp decline in Treasury yields, pushed the dollar index below the 99 mark, and allowed spot gold to break above the $4,500 level. However, analysts at Yardeni Research noted that Treasury Secretary Bessent's move was aimed at signaling a "whatever it takes" stance to suppress bond yields, but underlying concerns over debt supply-demand imbalances have not dissipated.

**Deep-Seated Bond Market Concerns Persist**

The rapid pullback in gold prices underscored the fragility of market sentiment. Reports indicated that the 20-year Treasury auction held that day saw weak demand, with a poor bid-to-cover ratio, while the high yield still hit the second-highest level on record. This suggests that despite the Treasury's attempts to stabilize markets through short-term operations, investor concerns over the massive scale of US debt and the lack of a clear deficit reduction plan remain deeply entrenched. Such worries continue to underpin gold's underlying demand logic as a safe-haven asset, limiting the depth of the price correction.

**Market Focus Shifts to Long-Term Drivers**

As of Thursday's trading session, gold futures edged down 0.4% to $4,529.21 per ounce, while spot gold retreated to around $4,509 after hitting a daily high of $4,540. In the near term, Treasury yields and dollar movements will continue to dictate the trading pace of gold prices. But from a medium-term perspective, strategists at multiple institutions believe that given the massive upcoming Treasury issuance and Washington's existing high debt levels, long-term yields will remain elevated, providing a potential supportive environment for gold.