On August 20, the spot gold price fell 0.98% to $4,478.68 per ounce; the spot silver price fell 0.51% to $66.64 per ounce.
On August 19, the US Treasury announced an expansion of the bond buyback program for longer-dated Treasuries, at least doubling the size of its liquidity support repurchase operations for 10-year to 30-year Treasury bonds. This move led to a decline in long-term US Treasury yields and a simultaneous drop in the US dollar index, providing direct price support for dollar-denominated gold. It subsequently drove international gold prices to surge on August 19, breaking through $4,500 per ounce, and boosted the shares of gold sector stocks.
However, JPMorgan strategists warned that markets may perceive the US Treasury's unexpected attempt to lower long-term financing costs as lacking credibility. Over time, this could push up term premiums and bond yields.
The US Treasury said on Wednesday it would at least double the size of its bond buybacks to provide "greater liquidity support," a move that would push down long-term US bond yields. But JPMorgan said this measure is only a temporary fix, not a permanent solution: the US economy is near full employment yet still runs a 6% fiscal deficit.
Strategists including Jay Barry wrote: "Without real fiscal consolidation, we worry the market will view this as lacking credibility. If the Treasury becomes more opportunistic in debt management and further deviates from its 'regular and predictable' principle, it could lead to higher long-term premiums and yields." The size of US Treasury debt has surpassed $40 trillion, increasing the difficulty for policymakers to control financing costs, while the US government continues to issue more debt. A market survey shows about 60% of respondents believe the US debt situation will continue to deteriorate until it triggers a major crisis.
