【TMGM Financial Recap】U.S. Treasury Makes Surprise Move, U.S. Treasury Yields and Dollar Fall Together, Gold Surges Over 4% to Two-Month High!
On Wednesday, the global gold market experienced a sharp rally. Spot gold prices surged more than 4% in a single day, breaking above $4,500 and reaching their highest level since early June. This sudden gold rally was not driven by traditional safe-haven sentiment, but was instead directly triggered by an unexpected liquidity support measure from the U.S. Treasury, which doubled the size of its buyback operations targeting long-term government bonds. The move quickly pushed long-term U.S. Treasury yields lower, weighed on the dollar, and opened up further upside for gold priced in U.S. dollars.
Against the backdrop of the 30-year U.S. Treasury yield hitting a 19-year high of 5.34% at one point the previous day, as well as the reality that total U.S. public debt has surpassed $40 trillion, the Treasury decided to double the buyback size for 10- to 30-year Treasuries. Each operation will be worth at least $4 billion, covering the 10- to 20-year and 20- to 30-year maturity ranges, and will take effect from September 9 to November 4. The planned buyback amount will therefore increase by at least $14 billion, bringing the maximum total buyback amount during the period to approximately $83 billion.
The move directly boosted market demand for longer-dated U.S. Treasuries. The 30-year Treasury yield fell sharply from its highs, most recently standing at around 5.184%; the 10-year Treasury yield also declined by about 6 basis points to around 4.66%. The U.S. Dollar Index fell simultaneously, hitting a nearly three-month low. A weaker dollar means that gold becomes cheaper for investors holding other currencies, further amplifying the upward momentum in gold prices. The global government bond sell-off therefore eased significantly, while longer-term government bond yields in the euro area also retreated from multi-year highs, indirectly easing upward pressure on U.S. borrowing costs.
The U.S. Treasury's move essentially provides stronger liquidity support for long-term nominal bonds. Market participants had previously shown strong demand for bonds in these maturities, while persistently rising yields not only increased the government's interest costs but also raised financing costs for the private sector and could keep mortgage rates elevated, potentially triggering broader financial market turbulence. Authorities are clearly concerned about the pain caused by long-term government bond yields reaching 5% or higher, particularly with only around three months remaining before the midterm elections.
On the same day that gold surged, the Federal Reserve released the minutes of its July 28–29 policy meeting. The minutes showed that policymakers had become increasingly concerned about inflation. Notably, the minutes did not trigger a significant reaction in financial markets. This was because the economic data released since the meeting had already made the economic conditions reflected in the minutes appear outdated. The core driver of this round of gold gains was more closely tied to the immediate reactions in yields and the dollar, rather than direct pricing of the Fed's hawkish stance.
Market Insight:
Gold surged sharply on the 4-hour chart, with the MACD lines and volume histogram contracting above the zero axis. Wednesday's gold surge was a liquidity and currency-driven rally triggered by a policy surprise. By expanding its long-term Treasury buyback operations, the U.S. Treasury successfully curbed further increases in yields, stabilized market sentiment, and unexpectedly created an ideal window for gold to rise.
