Gold prices in the European market declined on Thursday, giving up their highest level in 11 weeks recorded earlier in Asian trading, due to profit-taking and corrective activity.
This decline is curbing the continued fall of the US dollar in the foreign exchange market, especially after a surprise intervention by the US Treasury Department in the bond market, aimed at curbing long-term bond yields and injecting more liquidity into the markets.
Price overview
Gold prices today: Gold prices fell by 1.0% to ($4,477.98), from the opening level of trading at ($4,522.74), and recorded a high of ($4,527.58), the highest level since June 2.
When prices were settled on Wednesday, gold prices rose by 4.35%, in their third gain in the last four days, and the biggest daily gain since February 3, thanks to the US Treasury Department.
US dollar
The dollar index fell 0.1% on Thursday, deepening its losses for the second consecutive session and hitting a three-month low of 98.70 points, reflecting the continued decline in the value of the US currency against a basket of global currencies.
As we know, the decline in the value of the US dollar makes gold bullion priced in US dollars more attractive to buyers who hold other currencies.
Dollar selling activity intensified widely after the measures announced by the US Treasury Department to calm the bond market, which had seen long-term bond yields rise to their highest levels since 2007.
U.S. Treasury Department
The U.S. Treasury Department has unveiled plans to double the size of its long-term bond repurchase operations in an effort to support liquidity and calm turmoil in the bond market, after a sharp sell-off pushed the yield on 30-year Treasury bonds to its highest level in 19 years at 5.337%.
The U.S. Treasury Department announced a plan to double the maximum size of long-term bond repurchase operations from $2 billion to at least $4 billion per operation.
The repurchase operations include long-term nominal bonds in two tranches: the first for bonds with maturities between 10 and 20 years, and the second for bonds with maturities between 20 and 30 years.
This increase is scheduled to begin on September 9, 2026, and continue until November 4, 2026, coinciding with the next quarterly refinancing meeting of the Treasury Department.
Opinions and analyses
Tony Sycamore, a market analyst at IG, said: “The U.S. Treasury is pulling long-term bonds out of the market while continuing to issue more short-term bonds, putting downward pressure on long-term bond yields, without the Federal Reserve expanding its balance sheet.”
Sycamore added: This is not an official quantitative easing program, nor yield curve control, but it is a clear indication that Washington is prepared to face rising term premiums.
Brian Jacobsen, chief economic strategist at Anex Wealth Management, said the move represents a temporary solution and reflects what he described as an era of financial dominance and modern monetary finance.
Jacobsen added that the Federal Reserve has become limited in its ability to influence long-term interest rates, at a time when the Treasury Department is moving towards issuing more short-term debt, amid weak demand for long-term debt.
Jacobsen explained that even if the Federal Reserve raises interest rates, the Treasury is effectively pumping more short-term, cash-like debt into the economy, which could limit the effectiveness of monetary policy tightening.
US interest rate
Concerns about inflation intensified during the Federal Reserve meeting last month, as several policymakers indicated their willingness to raise interest rates.
Many of them said that higher borrowing costs would be necessary if inflation did not fall to the central bank's target of 2%, according to the minutes of the meeting released Wednesday.
According to the CME Group's FedWatch tool: The probability of the Federal Reserve keeping interest rates unchanged at its September meeting is currently priced at 67%, and the probability of a 25-basis-point rate hike is priced at 33%.
The probability of the Federal Reserve keeping interest rates unchanged at its December meeting is currently priced at 35%, and the probability of a 25-basis-point rate hike is priced at 65%.
In order to reprice those probabilities, investors are closely monitoring the release of more economic data from the United States, as well as following comments from Federal Reserve officials.
Gold performance forecast
FX News Today's view: Gold prices are currently declining due to profit-taking pressure after the significant jump that brought prices to the $4,500 per ounce mark.
Continued selling of the US dollar and falling US bond yields are factors that will revive gold prices again and push them to record new highs in several months.
SPDR Fund
Holdings of gold at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by about 9.42 metric tons on Wednesday, the biggest daily increase since January 16, bringing the total to 1,034.66 tons, the highest level since May 22.
