Is gold back?
Lead — The desk's thesis suggests that gold is finding renewed traction due to heightened investment demand and concerns over the U.S. fiscal outlook. Per the full note, gold's price has rebounded significantly from mid-July lows around $4,000/oz to levels near $4,600/oz, driven primarily by the U.S. Treasury's increased buyback operations of long-dated government debt. This commitment to buybacks signals rising concerns about government borrowing and the potential for currency debasement, reinforcing gold's role as a safe haven. With inflation persistent and the Federal Reserve poised to tighten further, the upward momentum for gold may face challenges despite this positive environment.
What the desk is arguing
The desk is asserting that gold's recent rebound is indicative of complex underlying dynamics in the U.S. fiscal landscape and asset allocations. The full note suggests that the latest climb from $4,000/oz to approximately $4,600/oz is supported not just by softer yields but also by investor anxiety over fiscal credibility and currency debasement concerns, highlighting gold's status as a safe haven.
Additional evidence of gold's resurgence stems from a notable uptick in global gold-backed ETF demand, which saw inflows of $3 billion in July, adding 23 tonnes to holdings according to the World Gold Council. This evidences a renewed appetite for gold as a protective asset in uncertain times, despite the countervailing pressures of ongoing inflation and the Fed's tightening stance.
Where it sits in our coverage
The current consensus for the EUR/USD stands at 1.1700, with targets spanning from 1.1200 to 1.2000 for March 2026. Specific firm targets include rabobank at 1.1759 and morganstanley at 1.2000 for the same tenor, showcasing a range of sentiment across the market from more conservative to aggressive bullish positions.
This projection aligns closely with the desk's perspective on gold's value as an alternative investment; however, it sits slightly above the more cautious median target of 1.1634, indicating a broad bullishness for the Euro against the Dollar in the wake of gold's positive indicators.
How other firms see it
Firms such as commerzbank and goldman maintain a bullish outlook with targets for EUR/USD sitting at 1.1900 and 1.1800 for March 2026. Conversely, banks like anz and investec project more muted targets closer to the lower bound of 1.1400.
The interaction between gold prices and the EUR/USD trajectory is noteworthy, especially as both are influenced by the Federal Reserve's policy signals and shifts in investor sentiment regarding U.S. fiscal sustainability.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Gold's price has rebounded sharply to about $4,600/oz due to fiscal concerns and increased investment demand.
- 02U.S. Treasury's expanded buyback operations serve as a signal of government borrowing risks, generating interest in gold as a safe haven.
- 03Increased demand for gold-backed ETFs replenished holdings, evidenced by $3 billion inflows in July.
- 04The outlook for gold reflects broader concerns in the currency markets regarding the U.S. fiscal situation.
Market implications
Traders should monitor gold's resistance levels and possible correlation with USD volatility, particularly against the EUR/USD as it approaches technical levels near 1.1700. Positioning for a stronger dollar could disrupt gold's recent momentum, highlighting the need for close scrutiny of inflationary reports and Fed communications.
Risks to this view
A shift in guidance from the Federal Reserve indicating a more aggressive tightening stance than markets expect could reverse gold's upward trajectory. Additionally, any stabilization in the U.S. fiscal outlook or stronger-than-expected economic indicators may diminish gold's traditional safe-haven allure.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Bullish | 1.1800 |
UOB | Bullish | 1.1725 |
Deutsche Bank | Neutral | 1.1668 |
Articles Is gold back? Published 11:58 Commodities, Food & Agri Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Gold has rebounded sharply from its July lows, supported by renewed investment demand and growing unease over the US fiscal outlook. But persistent inflation and the possibility of further Fed tightening mean the recovery is unlikely to be straightforward Ewa Manthey Growing concerns over the US fiscal situation and investment demand are giving momentum to gold prices Fiscal risks give gold fresh momentum Gold has climbed from around $4,000/oz in mid-July to around $4,600/oz, returning to levels last seen in May.
The latest move followed the US Treasury’s decision to increase its purchases of longer-dated government debt. The maximum size of buyback operations in the 10-to-30-year segment will rise from $2bn to at least $4bn, with Treasury Secretary Scott Bessent signalling that the programme could be expanded further. The bond-market impact proved short-lived, with long-term yields subsequently recovering much of their decline.
Gold, however, continued to strengthen. In our view, gold's resilience suggests that the rally is not simply a response to lower yields. The prospect of larger Treasury buybacks has refocused attention on government borrowing and fiscal credibility.
It has also revived concerns about currency debasement, reinforcing gold's appeal as a store of value. Gold rebounds despite elevated long-term yields Source: Refinitiv, ING Research "> Source: Refinitiv, ING Research A weaker dollar and lower short-term yields have helped gold rebound after prices found support around $4,000/oz in mid-July. Softer US data have also revived expectations that the Fed could begin easing policy in 2027.
Investment demand is recovering The improvement in ETF demand is another positive signal. Global gold-backed ETFs attracted $3bn in July, lifting their holdings by 23 tonnes, according to the World Gold Council. Gold ETF inflows return Source: WGC, ING Research "> Source: WGC, ING Research The recovery has continued into August.
Funds tracked by Bloomberg added around 18 tonnes on Thursday alone, their strongest daily accumulation in almost a year. Central banks also remain a significant source of demand. Reported net purchases reached 51 tonnes in June, taking the first-half total to 102 tonnes, with Poland and China leading the buying.
We expect official-sector buying to continue supporting the market, but further gains will increasingly depend on whether Western investors maintain their renewed interest in gold. Central bank purchases rebound Source: WGC, ING Research "> Source: WGC, ING Research Inflation remains the main headwind The rally still faces headwinds. Rising energy prices are adding to US price pressures and could keep monetary policy restrictive for longer.
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