TLDR
- Gold slipped from a three-month high, with spot gold dropping 0.4% to $4,634.20 an ounce
- Prices had surged last week after the U.S. Treasury announced plans to expand buybacks of longer-dated government debt
- Investors are now watching Wednesday’s core PCE inflation data and Fed Chair Kevin Warsh’s Friday speech at Jackson Hole
- Dollar weakness and lower bond yields had been supporting gold demand from overseas buyers
- Analysts say gold needs to hold above $4,700 an ounce to maintain its bullish momentum
Gold pulled back slightly on Tuesday after hitting its highest price since mid-May, as investors paused and waited for key economic signals later this week.
Spot gold fell 0.4% to $4,634.20 an ounce in early trading. Gold futures dropped 0.2% to $4,691.14.
The retreat came after a strong run last week that pushed prices to a more than three-month high.
What Drove Last Week’s Rally
The U.S. Treasury announced plans to at least double buybacks of longer-dated government debt. That sparked fresh concerns about fiscal policy and the long-term purchasing power of the dollar.
Bond yields fell in response, lowering the cost of holding gold, which pays no interest. A weaker dollar also made gold cheaper for buyers outside the United States.
Treasury Secretary Scott Bessent said on Monday he is prepared to expand those buybacks. He also said the administration will soon announce a plan to tackle the high cost of government borrowing.
These moves helped bring back the so-called debasement trade, a strategy where investors buy gold to protect against the dollar losing value over time.
Gold had already seen a sharp rally last year partly because of this same trade.
What Markets Are Watching Now
Investors are focused on two events this week. The Bureau of Economic Analysis releases its core personal consumption expenditures price index on Wednesday. This is one of the Federal Reserve’s preferred measures of inflation.
Then on Friday, Fed Chair Kevin Warsh speaks at the Jackson Hole annual conference. His comments could shape expectations for interest rate decisions ahead.
Analysts at Sucden Financial said gold needs to hold above $4,700 an ounce to keep its current positive momentum going.
Senior market analyst Tony Sycamore at IG said the recent gains confirm that gold likely formed a price floor near $3,942 back in late June.
He added that gold’s move earlier in August was partly driven by hopes for a Middle East diplomatic breakthrough, which would have pushed oil prices lower and eased pressure on central banks.
On the geopolitical front, the White House threatened economic penalties against countries still doing business with Iran. U.S.-Canada trade tensions also flared up after talks broke down, with Washington placing 50% tariffs on some Canadian goods.
These factors are adding to a mix of uncertainties that could keep gold in focus for investors watching for safe-haven demand.
Gold is holding near levels not seen since mid-May, with analysts watching the $4,700 level as the key line to hold.
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