TLDR
Gold climbed above 4,600 US dollars an ounce to its highest level since mid-May, closing the week up around 5 per cent. A surprise US Treasury decision to lift long-dated debt auction sizes pushed yields and the dollar lower, sending investors toward gold. Gains of this size have been recorded only seven times since 1986.
KEY TAKEAWAYS
Gold climbed above US$4,600 an ounce on Friday, its highest level since mid-May, capping a weekly gain of about 5 per cent that at one stage touched nearly 8 per cent. Moves of that size have been matched only seven times since 1986.[1]
The trigger was an unglamorous one: the US Treasury unexpectedly lifted its planned purchases of longer-dated government debt, pushing bond yields and the US dollar lower and reviving doubts about American fiscal sustainability. Gold, which pays no interest, becomes more attractive every time confidence in government paper weakens.[2]
The Australian angle
A record gold price lands directly on the ASX, where gold miners are among the market's largest stocks, and on a federal budget that counts gold among Australia's top ten exports. It also compounds the story Bushletter reported last week: US federal debt has now passed US$40 trillion, and the metal's strongest week in four decades is partly a verdict on that number.[3] Nothing here is investment advice; the price that matters next is Monday's New York open.
Our report on the US debt milestone is here.
SOURCES & CITATIONS
Elias Thorne writes about interest rates, the bond market and the Reserve Bank. He is interested in what monetary policy actually does to household budgets, and in the long stretches of economic history that tend to repeat.
