Gold Steadies Near Two-Month High as Treasury Move Weighs on Yields

Gold prices held near their strongest level in more than two months on Thursday, supported by a surprise move from the U.S. Treasury that pushed bond yields and the dollar lower.

Spot gold was little changed at $4,512.19 per ounce as of 0031 GMT, after touching $4,525.79 earlier in the session — its highest since June 2. Prices had jumped more than 4% on Wednesday.

U.S. gold futures for December delivery rose 0.6% to $4,569.80.

The Treasury Department announced it would double the size of its liquidity support buyback operations for longer-dated notes and bonds, a move that increased demand for Treasuries and pulled long-dated yields down. A softer dollar made gold cheaper for buyers using other currencies.

Meanwhile, the Treasury Department said on Wednesday that total U.S. debt had topped $40 trillion for the first time, reigniting warnings about a brewing fiscal crisis as spending on social programmes and interest payments outpace revenues.

Minutes from the Federal Reserve's last meeting, released Wednesday, showed that while "several" policymakers were ready to raise rates, "many" said a hike would be needed if inflation does not move back to the central bank's 2% target. Traders currently see a 67.3% chance the Fed holds rates steady in September and a 32.7% chance of an increase, according to the CME FedWatch tool.

Gold is often viewed as a safe haven during economic uncertainty, but higher interest rates tend to reduce its appeal since the metal pays no interest.

In other metals, spot silver gained 0.2% to $67.06 per ounce, platinum slipped 0.4% to $1,816.78, and palladium rose 0.3% to $1,339.05.