Gold continued its strong run on Tuesday as investors returned to the US dollar “debasement” trade following Washington’s plans to increase bond buybacks.
The precious metal gained around 0.9% in early trade, extending a rally that has pushed it to its strongest levels in roughly three months.
Gold is now on track for its best month since 1999, with a month-to-date gain of about 19%, as investors seek protection against concerns over the longer-term value of the US dollar.
The rally has continued despite some stabilisation in US bond yields and the greenback early this week.
Gold has also strengthened from a technical perspective after breaking above its 200-day moving average and key trend-line resistance.
IG analyst Tony Sycamore said last week’s move above resistance at US$4,420 and the 200-day moving average around US$4,515 provided further evidence that gold had established a bottom following its late-June low of US$3,942.
Sycamore expects any pullbacks to attract buyers, with gold potentially making its way towards the next resistance zone around US$4,900 to US$5,000.