US Treasury bond buy-back reinforces gold debasement trade as Jackson Hole meeting looms

The US Treasury’s decision to boost its buy-backs of long-maturity bonds is strengthening the debasement trade on gold, as investment banks turn more upbeat on the precious metal before the Federal Reserve’s annual meeting in Jackson Hole.

Gold traded at a three-month high of US$4,698 an ounce on Tuesday, extending a 5.1 per cent gain last week after Treasury Secretary Scott Bessent unveiled the repurchase programme, which he said was likely to surpass US$4 billion. The announcement renewed immediate concerns about the fiscal stress on Washington and the erosion of the purchasing power of the US dollar, which benefits gold as an alternative to fiat currencies.

Morgan Stanley predicted that gold prices would rise to US$5,000 by 2027, while Citigroup raised the three-month price target for the metal to US$4,800 from US$4,500. Dutch bank ING said that gold might face a risk of further upside throughout the year. A dovish tone by Federal Reserve chair Kevin Warsh at the coming Jackson Hole symposium later this week would add more impetus to bullion, which moves inversely with interest rates.

“Gold’s resilience suggests that the rally is not simply a response to lower yields,” said Ewa Manthey, a commodity strategist at ING.