Gold Prices Hit Three-Month High Amid U.S. Fiscal Tensions

Spot gold prices reached a three-month high on Monday, climbing above $4,630 per ounce after gaining more than 5% last week. The metal has rebounded sharply from mid-July lows of approximately $4,000 per ounce, returning to price levels last seen in May.

The United States Department of the Treasury drove the rally by announcing a plan to increase buybacks of longer-dated bonds. This move pressured the U.S. dollar and made bullion more affordable for international buyers. Strategists at ING noted that the possibility of larger buybacks has heightened concerns regarding U.S. government borrowing and fiscal credibility, reviving fears of currency debasement.

Geopolitical instability further bolstered gold's safe-haven appeal. The United States threatened Iran with a significant financial offensive involving sanctions on trade partners, which the Iranian foreign minister dismissed as a sign of desperation. Simultaneously, a trade conflict escalated after President Donald Trump imposed 50% levies on Canadian products, prompting Canadian Prime Minister Mark Carney to announce retaliatory tariffs.

Market participants are now looking toward the July Personal Consumption Expenditures price index and a keynote address by Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium for signals on future interest rate policy. Meanwhile, the Narodowy Bank Polski reported increasing its gold holdings to 20.6 million troy ounces by the end of July.