XAU/USD rose to near its highest level since May 14 on support from a weaker USD and the US Treasury's plan to increase bond buybacks.
At 9 am, gold was trading at $4,645, down 0.31% since it opened early Wednesday in Asian trading.
US Bond Yields Fall
US Treasury Secretary Scott Bessent had previously signaled that bond buybacks could be increased beyond US$4 billion.
The US Treasury also plans to double its repurchases of long-term securities.
The move helped lower US bond yields and spark short-covering activity, thus supporting gold prices.
A weaker US dollar also makes gold more attractive to holders of other currencies.
At the same time, lower bond yields reduce the opportunity cost of holding non-interest-bearing gold.
Iran Risks in Focus
Tensions between the US and Iran have also been on the market's radar after President Donald Trump's administration expanded secondary sanctions on entities and countries that maintain business ties with Iran.
The development has the potential to increase concerns about energy inflation, especially if pressure on global oil supplies increases.
However, higher inflationary pressures could also limit gold's gains if they fuel expectations that the Fed will keep interest rates high for longer.
Warsh to Decide Next
Investors' attention now turns to Fed Chairman Kevin Warsh's speech at the Jackson Hole Symposium on Friday.
Investors will be scrutinizing any clues about the direction of US interest rates.
A more hawkish tone could strengthen the US Dollar and bond yields, putting pressure on gold.
Conversely, a more dovish tone could increase expectations of policy easing and provide additional support for the precious metal.
For now, gold remains supported by a weaker US Dollar and falling bond yields, but the direction of the future will depend largely on the Fed's signals.
