Gold rebounds 5% on debt fears, dollar weakness, bond jitters

The World Gold Council's annual Central Bank Gold Reserves Survey, published in June, found that 89% of respondents expect global central bank gold reserves to increase over the next year. A record 45% expect their own institutions' holdings to rise, while 1% expect them to decline.

"Short-term moves like this week's announcement by Treasury Secretary Scott Bessent will keep driving volatility in the gold price, and tensions in the Middle East will add to that. The structural picture hasn't changed," said Theo Botoulas, CEO of Neo Energy Metals, a South Africa-focused gold and uranium developer. "Annual gold consumption is running at record levels of almost 5,000 metric tons per annum. At the same time, supply increases by little more than 1.5% annually."

Analysts cautioned that headwinds remain. Staunovo flagged higher oil prices from the Middle East conflict as a potential pressure point. "More expensive energy could add to inflation pressures and keep central banks more cautious about lowering interest rates, potentially supporting bond yields and weighing on the non-yielding metal," he said.

Rhona O'Connell, head of market analysis for EMEA and Asia at StoneX, said upward pressure on yields is expected to return given the strength of the U.S. economy. "On balance, gold has to weigh up the headwinds of high, and likely continued rising, Treasury yields against the tailwinds of a weaker dollar – and don't forget the Gulf. Much of this is already priced in."

David Morrison, senior market analyst at Trade Nation, said the latest rebound could leave gold vulnerable to a near-term pullback. "While this move in gold is impressive, especially given its 10% rally off multi-month lows since the end of last month, it may be a case of too far, too quickly. Prices may have to back up and fill in now for gold to make further gains," he said. "Even if gold were to drop back to $4,400, if it could find support there, that would be a positive sign for the bulls."

Garrett added that short-term volatility from policy announcements supports underlying demand trends for precious metals. The Treasury's buyback expansion and the $40 trillion debt milestone, she said, reinforce the structural case for gold allocations by central banks and institutional investors.