Gold futures climbed to a three-month high Friday, putting the metal on pace for a 5% weekly gain after the US Treasury announced a major expansion of its bond buyback program.
The weekly advance marks gold's third consecutive week of gains and its sharpest move since early this year.
The catalyst arrived Wednesday, when the Treasury said it would at least double buybacks of 10- to 30-year government debt.
The move was designed to stabilize a selloff in longer-dated Treasuries, but the dollar fell to a three-month low and gold surged.
Treasury Secretary Scott Bessent went further Thursday, signaling willingness to expand buybacks again and flagging an upcoming fiscal initiative to address elevated borrowing costs.
Investors read both moves as signs that the US is prioritizing yield suppression over currency strength. The announcement also landed as US government debt crossed $40T for the first time.
"The dollar will pay the price."
Bhanu Baweja, UBS Group
That combination reignited the so-called debasement trade, a bet that heavily indebted governments will inflate away their debt, weakening their currencies’ purchasing power and boosting gold.
Bullion-backed ETFs added 18 metric tons in a single day Thursday, the largest one-day inflow since Sept. 2025, putting funds on track for a fifth straight week of inflows.
Gold also broke above its 200-day moving average near $4,513, a level technical analysts typically read as a bullish signal.
UBS strategists expect gold futures to run further, citing rising debt burdens and government financing uncertainty as durable tailwinds. Their 12-month target sits at $5.4K per ounce.
Near-term risks remain
Not everyone is bullish in the short run. Senior market analyst David Morrison noted that gold's roughly 10% rally off multi-month lows in just a month could leave it vulnerable to a pullback.
Higher oil prices pose another headwind. Trump's threats against Iran have pushed crude sharply higher, raising inflation fears and keeping the door open to Fed rate hikes.
Since gold pays no yield, rising rates typically weigh on it. Charu Chanana, chief investment strategist at Saxo Markets, noted that gold has held up even as long-end Treasury yields stay elevated.
That suggests the rally is more about dollar credibility than simple yield math. Annual gold consumption is running near a record 5K metric tons, while supply grows just 1.5% per year, keeping the underlying market tight regardless of short-term macro noise.