Gold rebounds above $US4500 as investors return to bullion
Gold has pushed back above $US4500 an ounce after a sharp recovery in bullion, with falling long-term US bond yields, fresh exchange-traded fund inflows and continued central-bank buying helping revive demand.
The rally followed an announcement from the US Treasury that it planned to at least double buybacks of longer-dated government bonds. The move came after concerns about the Iran war and worsening US fiscal conditions triggered a bond-market sell-off that sent the 30-year Treasury yield to its highest level since 2007.
Hours later, the Treasury disclosed that US public debt had exceeded $US40 trillion ($56 trillion) for the first time, representing an increase of about one-third in less than five years. Despite that backdrop, the 30-year yield fell 10 basis points, easing financial conditions and increasing the relative appeal of non-yielding assets such as gold.
Gold miners join the rebound
Bullion rose as much as 3.8 per cent in New York to more than $US4499 an ounce, its highest level since early June, before reaching $US4520 during Asian trading.
The move flowed through to Australian-listed miners. Ramelius Resources, Genesis Minerals, Regis Resources, Greatland Gold and Vault Minerals all posted double-digit gains.
The rebound follows a steep correction. Gold fell into a bear market last month when it dropped below $US4000 an ounce, more than 20 per cent below its January record of about $US5400. The decline was attributed to a stronger US dollar, changing expectations for US interest rates and volatile oil prices.
Investors responded by rebuilding exposure through gold exchange-traded funds. Australian gold ETFs recorded their largest month-on-month turnaround in net flows on record, moving from $253 million of outflows in June to $238 million of inflows in July.
In the United States, physically backed gold ETFs attracted roughly $US3 billion of net inflows in July after two consecutive months of outflows. Bloomberg-tracked bullion ETFs added more than 257,000 ounces to their holdings on Tuesday alone, the largest daily increase since April.
Central banks remain a source of demand
Bank of America’s latest investor survey indicated that fund managers regarded bullion as the most undervalued since March 2023.
Betashares senior investment strategist Cameron Gleeson said the latest rebound suggested the worst of the recent pullback may have passed, while continued central-bank buying and de-dollarisation remained important sources of support.
The People’s Bank of China added 20 tonnes of gold last month, its largest monthly purchase since October 2023, extending its buying streak to 21 consecutive months.
A World Gold Council survey found 89 per cent of reserve managers expected gold holdings to increase over the next 12 months, while a record 45 per cent expected their own institution to buy more.
Risks remain. Brent crude climbed above $US92 a barrel after rising more than 5 per cent over the previous four sessions, while bond markets still implied roughly a one-in-three chance that the US Federal Reserve would lift interest rates in September.
Saxo Bank head of commodity strategy Ole Hansen identified the 200-day moving average, around $US4510 an ounce, as an important technical level. He said a sustained move above it would strengthen gold’s technical outlook and suggest the correction from the January peak may have run its course.
SOURCE ATTRIBUTION:
Based on reporting by The Australian Financial Review.
