Gold climbed to its highest level in three months on Tuesday as a weaker dollar and falling Treasury yields boosted demand for the metal. Bitcoin rallied alongside it, crossing $80,000 for the first time since mid-May.
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.
Bond buybacks weaken the dollar
The rally comes 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 report by the World Gold Council.
Markets have also largely priced out a September Fed hike as softer data eased concerns about further tightening, the World Gold Council said. At the same time, the council noted that a reversal in short Treasury futures positioning could add further pressure on yields and an already softer dollar, adding further support to gold's nascent recovery.
Gold ETFs snap back from outflows
Demand for gold-backed ETFs had already started to recover. Global gold-backed ETFs recorded $3 billion in net inflows in July, reversing two consecutive months of outflows.
Holdings increased by 23 metric tons to 4,068 tons, while assets under management rose 1% to $530 billion, the World Gold Council reported. European funds led with $2 billion in inflows, followed by $616 million in Asia and $71 million in North America.
Haven demand meets a weaker dollar
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.
According to Nansen: "BTC and gold rising together while the dollar weakens is consistent with debasement", senior research analyst Jake Kennis told Decrypt. He added that a weaker dollar alongside elevated yields can also reflect a higher term premium or shifting growth expectations, so the correlation remains suggestive rather than proof for now.
Source: Decrypt
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