Gold: Upside Risks Building Amid Rising Fiscal Concerns – ING

Spot gold is currently trading near $4,649.60, extending its recent strength. Ewa Manthey, commodity strategist at ING, noted that gold prices have rebounded significantly from the low of near $4,000 seen in July, with renewed investment demand, a weaker U.S. dollar, and growing market concerns over the U.S. fiscal outlook jointly providing solid support for the metal.

**Fiscal Concerns and Dollar Weakness as Core Drivers**

An unexpected move by the U.S. Treasury has recently acted as a catalyst igniting bullish sentiment in gold. According to reports, the U.S. Treasury announced it would double the scale of its buyback operations for certain long-term debt to support market liquidity. This move briefly drove U.S. Treasury yields sharply lower and triggered a dollar sell-off. Market analysts believe this reinforces the "currency debasement trade" narrative, underpinned by the expanding U.S. fiscal deficit and deeper policy concerns. Although the pullback in long-end Treasury yields was short-lived, the policy signal was sufficient to push gold prices above a key range to their highest level since early June.

**Safe-Haven Sentiment and Policy Expectations Align**

Beyond fiscal factors, persistent geopolitical uncertainty is also generating safe-haven buying for gold. Meanwhile, market expectations regarding Federal Reserve policy remain in flux. TD Securities analysts pointed out that with Treasury liquidity support, the Fed potentially looking past energy price shocks, and a heating stagflation narrative, fund flows could quickly return to the gold market, and these factors should ultimately lead to lower real interest rates, laying a new upside foundation for precious metal prices.

**Technicals and Fund Flows Provide Support**

From a technical perspective, gold has accumulated significant bullish momentum, with buyers recently dominating. Deutsche Bank had previously noted that sustained central bank buying, coupled with exchange-traded fund (ETF) inflows, has placed gold in a strong upward phase. ING strategists also confirmed that the rebound in gold prices is being supported by recovering investment demand. As market doubts over U.S. fiscal health deepen, gold's function as a store of value as a non-sovereign asset is further highlighted, and upside risks are building.