The repurchase of U.S. Treasury bonds has ignited the revival of "dollar depreciation trades," with gold aiming for $4,700 to reach a new three-month high.

Gold is experiencing a strong rebound ignited by Washington. In early Asian trading on Tuesday, spot gold was trading around $4,675 per ounce, continuing its upward trend. On Monday, the price of gold briefly reached $4,680.70, marking a new high of over three months since May 14. Since the U.S. Treasury announced an expansion of the long-term Treasury bond repurchase program on August 19, gold has risen for four consecutive trading days, with a cumulative increase of over 7%. Behind this rebound is a rocket-style intervention in the bond market by Treasury Secretary Scott Bessen, coupled with deep-rooted market anxiety about the erosion of the dollar's credit. Bond buybacks rocket launch: from $2 billion to $4 billion, and then a trillion-dollar expectation On August 19, the U.S. Treasury announced that it would at least double the liquidity support repurchase operations for 10 to 30-year long-term Treasury bonds from $2 billion to $4 billion per operation. Just a few days later, an even more significant signal followedaccording to CNBC, the U.S. Treasury is considering utilizing nearly $1 trillion from the Treasury General Account (TGA) to fund the buyback program. This series of operations has been interpreted by the market as the U.S. government artificially keeping long-term interest rates suppressed to provide a cushion for its massive debt. Bloomberg macro strategist Simon White noted that if TGA funds are used for the repurchase, this operation would no longer be considered a strictly distortionary operation but would be closer to a net liquidity injection. As a result, gold has become a more direct quasi-QE trade than Treasury bonds. However, the impact of the buybacks only lasted for one day, and long bond yields subsequently retraced most of their declines. The yield on 30-year Treasury bonds remained above 5% after a brief dip. Concerns over the long-term fiscal outlook for the U.S. have not dissipatedamid a backdrop of inflation still above targets and expanding fiscal deficits, traders' focus on the sustainability of U.S. finances is heating up again. The dollar becomes a sacrifice: the depreciation trade resurfaces The cost of Bessens intervention in the bond market is being paid for by the dollar. The U.S. dollar index previously dipped to a three-month low, and although it made a slight rebound to 98.99 on Monday, it remains in a weak overall pattern. Shaun Osborne, chief forex strategist at Scotiabank, stated bluntly, Theres always a price to pay, whether it manifests as rising Treasury yields or the dollar needing to make concessions. Efforts to suppress U.S. Treasury yields are reigniting the so-called theme of currency depreciationa theme that drove gold to a 65% surge in 2025. Justin Lin, an analyst at Global X ETFs, remarked, I see macro funds having plenty of room to shift significantly toward precious metals based on this narrative of currency depreciation. For gold, a weaker dollar means that dollar-denominated gold becomes relatively cheaper for non-dollar investors, directly lowering purchasing costs and stimulating buying. More importantly, concerns over U.S. fiscal sustainability are fundamentally undermining the credit foundation of the dollar. Iran sanctions pouring oil on the fire: safe-haven demand for precious metals rising Beyond fiscal intervention, geopolitical risks are providing additional momentum for gold. Treasury Secretary Bessen announced unprecedented economic sanctions against Iran, targeting nearly 60 entities linked to Iran, covering areas such as digital assets, technology, gold, aviation, and shipping. This economic action, dubbed Outcast, aims to cut off every potential revenue source for Irans Islamic Revolutionary Guard Corps. Developments in the Middle East have significantly increased the attractiveness of gold as a safe-haven asset. As of the time of this report, gold prices have risen by 0.5%. Silver prices are up 0.9%, to $69.53 per ounce. Prices of platinum and palladium have also increased. The Bloomberg Dollar Spot Index, which measures the dollars value, has dipped slightly. Technical indicators turn bullish across the board: breakthroughs of the 200-day moving average and a flood of ETF funds The technical outlook for gold has completely turned bullish. Last week, gold prices broke through the crucial resistance of the 200-day moving average (around $4,510-$4,520). Socit Gnrale pointed out that subsequent resistance levels for gold are located at $4,730, $4,770, and the April peak of $4,890. The signals from the funding side are also strong. Gold ETFs tracked by Bloomberg increased their holdings by over 28 tons last week, marking the largest single-week increase since January. Global gold ETFs recorded the largest single-week inflow in ten months (46.7 tons, approximately $6.4 billion), led by funds listed in North America and Europe. Of particular note, Bridgewater Associates founder Ray Dalio posted on LinkedIn last week, advising investors to reduce bond holdings and allocate as much as 15% of their funds to gold to hedge against the risks of a U.S. debt crisis. Upcoming challenges: Kashkari's first address in Jackson Hole sets the tone However, the path to rising gold prices is not straightforward. Federal Reserve Chair Kevin Kashkari is scheduled to deliver his first keynote address following his appointment at the Jackson Hole Global Central Bank Symposium on August 28. The market is closely watching how he interprets inflation, employment, interest rate paths, and policy response mechanisms. If Kashkari sends a dovish signal, market rate hike expectations may cool, providing a new impetus for precious metals; if he emphasizes inflation risks and signals hawkish tendencies, the dollar and Treasury yields may strengthen, putting short-term pressure on precious metals. Before that, the PCE price index set to be released on Wednesday will also provide the market with crucial short-term guidance. Ewa Manthey, a commodities strategist at ING, warns that inflation remains stubborn, and the Federal Reserve still has room for further rate hikes, suggesting that the upward path for gold may not be smooth.