Gold Extends Rally as Treasury Buyback Plan Pressures Dollar

Key Moments

Gold Climbs as Treasury Signals Expanded Buybacks

Gold prices are advancing in early Asian trading on Monday, with XAU/USD hovering around $4,625. The move places the metal at its strongest level since May 15, supported by renewed weakness in the US Dollar following fresh indications of expanded Treasury buybacks.

US Treasury Secretary Scott Bessent stated on Thursday that the government may lift bond repurchases beyond $4 billion, one day after the department outlined plans to double buybacks of longer-dated securities. This prospect has cooled Treasury yields and pushed the Dollar lower. Because gold is denominated in USD, a softer currency makes the metal cheaper for non-US investors and typically boosts demand.

“A big factor, of course, is technical… next step is $4,700 if this momentum continues, but also I think it’s been very much driven by a drop in the U.S. dollar,” said Bart Melek, global head of commodity strategy at TD Securities.

Middle East Tensions and Fed Outlook Temper Upside

At the same time, ongoing tensions in the Middle East are stoking concerns about energy-driven inflation, which could revive expectations for additional Federal Reserve rate hikes in the coming months. Such a scenario may limit further gains in gold. While the metal is frequently used as an inflation hedge, it does not generate income, which can diminish its appeal when interest rates are elevated.

Iran’s Foreign Minister Abbas Araghchi dismissed the prospect of new US economic sanctions as a “desperate” tactic and said the anticipated measures would not succeed in defeating Tehran, according to Reuters. US President Donald Trump last week unveiled a new initiative aimed at intensifying pressure on Iran’s economy, describing it as “the most crushing economic operation ever taken against any country”.

Tactical Support From Treasury and Fed Stance

TD Securities highlighted the importance of the Treasury’s approach to the long end of the curve, noting that “the signal of the Treasury looking to support the longer end may offer enough support on its own,” particularly for gold and the wider precious metals space. The firm added that this is complemented by “a Fed willing to look past higher energy prices,” a combination they see as reinforcing gold’s elevated trading band and preserving the potential for additional upside as trend-following strategies adjust to the evolving policy environment.

Technical Picture: Bullish Bias Amid Overbought Conditions

On the daily chart, XAU/USD maintains a positive short-term tone, with prices sustained above the 100-day simple moving average (SMA) and the middle line of the Bollinger Bands. This alignment continues to support the broader uptrend.

However, the 14-period Relative Strength Index reading of 70.81 indicates overbought conditions, suggesting that the latest advance may be stretched even as prices approach the upper Bollinger Band.

On the upside, the immediate technical barrier is located around the upper Bollinger Band near $4,675.80, a zone where new selling interest could emerge if buyers push for another leg higher. On the downside, the current price area is acting as an initial floor, followed by the 100-day SMA at $4,379.39 and the middle Bollinger Band near $4,305.50. A more pronounced pullback would bring the lower Bollinger Band around $3,935.20 into view.