Gold Continues Third-Week Rally: 5% Gains, $4,603 per Ounce

Gold prices ended last week’s trading higher at $4,603 per ounce, marking gains for the third consecutive week with a weekly rise of approximately 5 percent compared to the previous week’s close at $4,377. This performance was driven by continued weakness in the US dollar and rising demand for the precious metal as a hedge against economic, financial, and geopolitical risks.

According to a report issued on Sunday by Kuwait Mint Company, the strong gains in gold followed notable movements in US bond markets after the US Treasury Department announced an expansion of its long-term government debt buyback operations. The department stated that the value of each buyback operation would rise to at least $4 billion, a move aimed at supporting liquidity in the long-term bond market and mitigating disruptions caused by rising borrowing costs.

The report clarified that the announcement initially led to a sharp decline in bond yields alongside a drop in the dollar, providing a strong boost to gold and contributing to its gains throughout the week.

It added that these developments come amid growing concerns over rising US public debt, fiscal deficits, and debt servicing costs, particularly after the total US public debt surpassed the $40 trillion mark for the first time. This has heightened worries about the sustainability of US public finances and prompted investors to increase their demand for gold as an alternative asset to hedge against risks of a decline in the dollar’s purchasing power.

The report noted that gold also benefited from a reduction in market bets on near-term US interest rate hikes, even though the minutes of the Federal Open Market Committee meeting revealed ongoing divisions among monetary policymakers regarding the interest rate path. Some members argued for a more stringent policy if inflationary pressures persist.

It pointed out that interest rate expectations remain one of the most influential factors affecting gold prices, as higher rates increase the opportunity cost of holding the non-yielding metal.

Furthermore, the US dollar fell in the currency markets to levels close to several-month lows, providing additional support for dollar-denominated gold.

The report highlighted that gold rose last week to its highest level in over three months, with spot prices peaking near $4,632 per ounce before retreating slightly to close the week at $4,603.

It stated that US bond yields recovered part of the losses incurred following the Treasury’s announcement, but this did not prevent gold from continuing its upward trajectory. This indicates that demand for the metal relies not only on interest rate and yield movements but also on concerns regarding US debt, fiscal policy, and dollar weakness.

On the geopolitical front, the Kuwait Mint report stated that developments in the Middle East and tensions related to Iran and the Strait of Hormuz remained among the key factors influencing markets. Meanwhile, rising oil prices kept inflation risks alive.

The report said that rising oil prices have a dual impact on gold: they support demand for safe-haven assets and hedging against risks, but they may also push the Federal Reserve to keep interest rates high for longer if inflationary pressures persist.

It added that demand from central banks and gold exchange-traded funds (ETFs) remains a fundamental factor supporting prices, as investors continue to increase hedging against global economic and financial risks.

The report noted that markets showed an increase in demand for gold call options, coinciding with a decline in the US dollar and growing concerns over US fiscal policy, which bolstered the upward momentum of the precious metal.

It added that investors are focusing particularly on the Jackson Hole symposium, where Federal Reserve officials may provide new signals regarding the future of monetary policy and interest rates.

The report highlighted that markets are awaiting a series of important US economic data releases this week, including personal income and spending figures, the Personal Consumption Expenditures (PCE) price index, and durable goods orders, alongside the annual revisions to non-farm payroll data.

It noted that inflation data, particularly the PCE price index, will attract significant market attention due to its importance in determining the trajectory of US monetary policy.

It forecast that if the dollar’s weakness persists, bond yields decline, and expectations for interest rate hikes recede, gold may continue its upward surge, testing the $4,650 level, followed by $4,700, with a potential reach of $4,750 if positive momentum holds.

The “Dar Al Ansab” report pointed out that the $4,700 level represents a prominent technical target, following gold’s successful breakout above its 200-day moving average and the continuation of upward momentum.

It clarified that, conversely, a rise in the dollar or bond yields, along with renewed inflation concerns, could prompt investors to take profits after gold’s strong gains in recent weeks, potentially pushing prices toward key support levels.

It noted that the $4,600 zone will remain pivotal in determining gold’s direction in the coming period, as maintaining trading above this level will sustain the uptrend and support an attempt to break the recent peak, whereas a breach could trigger a correction toward $4,550 and then the $4,513 zone, which represents significant technical support near the 200-day moving average.

It indicated that gold’s ability to hold the $4,600 level and surpass the recent peak will be a crucial technical factor in determining its capacity to continue rising, while US economic data, statements by Federal Reserve officials, and geopolitical developments will remain the primary drivers of prices.

It added that the dollar’s weakness, rising concerns over US debt and deficits, the Treasury Department’s expansion of debt buyback operations, and sustained investment demand for gold were the key supporting factors last week.

The “Dar Al Ansab” report explained that a breakout above the $4,650 and then $4,700 levels would constitute a new positive signal, potentially paving the way for higher levels, whereas a break below $4,550 would be the first sign of weakening short-term upward momentum.

On the local front, it noted that the gains achieved by precious metals in global markets were reflected in Kuwaiti market prices, with the price of 24-karat gold reaching approximately 0.45380 Kuwaiti dinars per gram (about $147), 22-karat gold recording around 0.41600 dinars (about $135), and 21-karat gold reaching approximately 0.39710 dinars (about $129). Meanwhile, the price of a kilogram of silver stood at around 0.747 dinars (approximately $2,435).