Gold gains momentum above $4,600 on US Treasury buyback plans

Gold price (XAU/USD) gains traction to around $4,625 during the early Asian trading hours on Monday. The precious metal climbs to the highest since May 15 as the US Treasury's buyback support plan weighs on the US Dollar (USD).

US Treasury Secretary Scott Bessent said on Thursday the government could increase bond buybacks beyond $4 billion, a day after the department unveiled plans to double buybacks of longer-dated securities. 

This development has cooled Treasury yields and dragged the USD lower. It’s worth noting that because gold is priced in the USD, a weakening currency makes it significantly cheaper and more attractive to foreign buyers. 

"A big factor, of course, is technical... next step is $4,700 if this momentum continues, but also I think it's been very much driven by a drop in the U.S. dollar," said Bart Melek, global head of commodity strategy at TD Securities.

On the other hand, energy-driven inflation concerns amid ongoing Middle East tensions could raise the prospect of Federal Reserve (Fed) rate hikes in the coming months. This, in turn, might cap the upside for the yellow metal. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.

Iran's Foreign Minister Abbas Araghchi dismissed the threat of a fresh round of US economic sanctions as a “desperate” ploy and said the expected new measures would fail to defeat Tehran, per Reuters. US President Donald Trump last week announced a new campaign to increase the pressure on the Iranian economy, calling it “the most crushing economic operation ever taken against any country”.  

Treasury support at the long end underpins Gold as Fed looks through energy

According to TD Securities, “the signal of the Treasury looking to support the longer end may offer enough support on its own,” particularly for Gold and the broader precious metals complex. This is reinforced by “a Fed willing to look past higher energy prices,” which, in their view, helps sustain the current higher trading range and keeps the door open to further upside as trend-following flows respond to the evolving policy backdrop.

Technical Analysis: Gold maintains a constructive outlook amid overbought RSI momentum

In the daily chart, XAU/USD holds a bullish near-term bias as it extends above the 100-day simple moving average (SMA) and the Bollinger middle band, keeping the broader uptrend supported. However, the latest 14-period Relative Strength Index at 70.81 shows overbought conditions, hinting that upside momentum could be stretched even as price pushes toward the upper Bollinger band.

On the topside, immediate resistance is aligned with the Bollinger upper band at roughly $4,675.80, where fresh supply could emerge if buyers attempt another leg higher. On the downside, initial support is seen at the current price area as a nascent floor, followed by the 100-day SMA at $4,379.39 and the Bollinger middle band at $4,305.50, while a deeper correction would expose the lower Bollinger band near $3,935.20.