In brief
- Gold climbed toward $4,700 an ounce Tuesday, reaching its highest level since mid-May.
- Bitcoin crossed $80,000 for the first time in three months as the dollar weakened.
- Gold-backed ETFs recorded $3 billion in net inflows in July after two consecutive months of outflows.
Gold climbed to a three-month high Tuesday, extending its August rally as a weaker dollar and falling Treasury yields boosted demand for the precious metal.
Spot gold reached $4,696.18 an ounce, its highest level since May 14, before pulling back. Bitcoin rallied alongside gold, climbing above $80,000 for the first time since mid-May and reaching $81,237 before giving back some of its gains.
The rallies come as the dollar and long-term Treasury yields have fallen following the Treasury Department's expansion of bond buybacks last week. Gold jumped 3% after the announcement, according to a recent report by the World Gold Council.
Demand for gold investment products had already started to recover. Global gold-backed exchange-traded funds recorded $3 billion in net inflows in July, reversing two consecutive months of outflows, according to the World Gold Council. Holdings increased by 23 metric tons to 4,068 tons, while assets under management rose 1% to $530 billion.
“Markets have largely priced out a September Fed hike as softer data, albeit influenced by seasonality and World Cup-related distortions, have eased concerns about further tightening,” the World Gold Council wrote. “At the same time, Commodity Trading Advisor (CTA) positioning in Treasury futures is still very short, and a reversal could reinforce downward pressure on yields and an already softer dollar–adding further support to the nascent recovery in gold since the beginning of the month.”
The World Gold Council said investors returned to gold as prices recovered in July, ending a four-month losing streak with a roughly 2% gain. European funds led with $2 billion in inflows, followed by $616 million in Asia and $71 million in North America. The rally accelerated in August as the end of the U.S.-Iran ceasefire and expanded U.S. Treasury bond buybacks added to geopolitical and fiscal uncertainty.
Gold and Bitcoin have both benefited from the weaker dollar, though investors buy the assets for different reasons. Gold has traditionally served as a haven during periods of economic and geopolitical uncertainty, while Bitcoin is increasingly traded as an alternative to government-issued currencies.
“BTC and gold rising together while the dollar weakens is consistent with debasement and fiscal-credibility concerns, i.e., the classic 'hard asset' hedge trade,” Jake Kennis, senior research analyst at Nansen, told Decrypt.
“But a weaker dollar alongside elevated yields can also reflect higher term premium, inflation uncertainty, or changing growth expectations rather than a pure loss of faith in Treasuries, so the correlation is suggestive rather than proof as of now.”
