Gold Holds Above $4,500, Set for Third Weekly Gain on Lower Yields and Weaker Dollar

Gold prices held firm above the key $4,500 per ounce level on Friday, positioning the precious metal for its third consecutive weekly gain. The rally is being fueled by a weaker U.S. dollar and a U.S. Treasury plan to buy back more long-term debt, which has pushed government bond yields lower.

As of 10:12 PM ET (02:12 GMT), spot gold was trading at $4,520.71 an ounce, while gold futures were at $4,576.51. The metal is up approximately 4% for the week and is on course to finish August more than 11% higher, according to Investing.com data.

Treasury Action and Dollar Weakness Fuel Rally

The primary driver for gold's recent strength has been developments in the U.S. bond market. The Treasury announced this week it would double its buybacks of longer-dated securities to at least $4 billion per operation for the next quarter. Treasury Secretary Scott Bessent stated on Thursday that these purchases could be increased further.

These buybacks help push long-term bond yields down. This matters for gold, a non-yielding asset, because lower bond yields reduce the opportunity cost of holding bullion instead of interest-bearing government debt. The lower yields have also pressured the U.S. dollar, which was on track for a weekly decline of more than 0.8%, making gold more affordable for international investors.

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Market Outlook: Fed Policy in Focus

Investors are now closely watching for signals from the Federal Reserve. Recent U.S. labor data, which showed a slip in weekly jobless claims, suggests a relatively stable labor market. This allows the Fed to remain focused on inflation, leaving the timing of its next interest rate move uncertain.

Higher interest rates typically weigh on gold prices. According to the CME FedWatch tool, markets are currently pricing in a 64% probability that the central bank will keep rates unchanged at its September meeting, with a 36% chance of a hike. Analysts at ANZ noted that the week's price action has also reinforced gold's appeal as investors seek to diversify away from the dollar and U.S. assets amid growing fiscal concerns.