【TMGM Financial Recap】US Treasury Yields Rebound in Sync With The US Dollar, Gold Strongly Reclaims the $4500 Mark!
On Thursday, gold recovered part of its intraday losses and climbed back above the $4,500 mark; After a sharp decline the previous day, U.S. Treasury yields rebounded and the dollar gradually stabilized.
On Wednesday, the U.S. Treasury announced an expansion of long-term Treasury liquidity repurchase operations, and following this news, gold rose more than 4% in a single day. After the announcement, the 30-year Treasury yield fell about 9 basis points to 5.18%; The benchmark 10-year U.S. Treasury yield fell about 5 basis points to 4.63%.
Earlier this week, the yield on 30-year U.S. Treasuries briefly broke through 5.30%, reaching a new high since 2007. This buyback by the Treasury has given the bond market some breathing room. But by Thursday, both the 10-year and 30-year U.S. Treasury yields had rebounded by about 6 basis points. Although repo operations can ease short-term pressure on the bond market, they cannot solve deep-rooted issues such as massive fiscal deficits, large-scale bond issuance, and persistent inflation risks.
Market concerns about fiscal risks have boosted safe-haven buying of gold, which is seen as a tool to hedge against government debt expansion and fiscal uncertainty, limiting the downside for gold prices. U.S. Treasury
Secretary Bescent said on Thursday that the scale of this bond buyback could exceed $4 billion. Gold trends are also heavily influenced by Federal Reserve monetary policy. TD Securities pointed out that the Treasury's signals of support for the long-term bond market, combined with the Federal Reserve's willingness to tolerate higher energy prices, are sufficient to support gold prices in the short term. However, the next substantial increase in gold prices will still take time. The market is still pricing in a rate hike in 2027, and only when the market generally believes the Fed will keep rates unchanged will gold start a new upward trend. The market currently bets on a 65% probability that the Fed will keep rates unchanged in September, compared to just 35% a month ago.
The San Francisco Fed President stated on Thursday that rising bond yields do not signal a monetary policy adjustment, and that the Fed's current policy is within an appropriate range. Short-term yields reflect the market's understanding of the Fed's policy response logic while emphasizing that the Fed's core task is to achieve inflation targets.
Market Insight:
Gold rebounded at a 4-hour level high, with both MACD double lines and volume bars shrinking above the zero axis. A recent significant change in gold prices is the beginning of decoupling from long-term real yields. Morgan Stanley pointed out that when gold prices rose in early August, long-term U.S. Treasury yields were basically flat, indicating that gold seems to be trading more fiscal concerns behind high yields than the yields themselves.
