Deutsche Bank urges investors to consider gold after the U.S. Treasury doubles its bond buyback program, fueling debate over inflation, yields, and safe-haven demand.
Gold prices have climbed to near three-month highs, marking their longest winning streak since late 2023, as the U.S. Treasury's expansion of its bond buyback program renews investor interest in the metal. Deutsche Bank, a leading proponent of gold, has raised its price target and advised clients to consider gold exposure amid evolving policy dynamics.
The U.S. Treasury's expanded bond buyback operations are scheduled to run from September 9 to November 4, 2026, with a minimum limit of $4 billion per operation.
The Treasury's intervention, which permits use of its General Account if needed, signals a more active approach to managing borrowing costs. Deutsche Bank analyst Michael Hsueh noted that this policy shift could push gold above the bank's revised $4,800 per ounce target. On August 24, gold prices rose over 1% to $4,647 per ounce, reflecting investor demand for assets considered resilient to policy-driven volatility.
Market commentary from Reuters and CNBC highlights that the Treasury's buyback announcement, combined with a weaker dollar, was a key driver behind gold's rally to over $4,635-$4,647 per ounce on August 24. However, by August 26, spot gold had already retreated to around $4,607 per ounce, illustrating the volatility and sensitivity of gold prices to policy news and currency moves.
Central bank demand has provided significant support for gold prices. According to the World Gold Council, central banks purchased a net 288.9 tonnes of gold in the second quarter of 2026, a 62% increase year-over-year and the strongest second quarter on record. This accumulation occurred even as gold prices declined, and nearly 90% of surveyed reserve managers indicated plans to increase gold holdings over the next year.
While central bank buying offers price support, risks remain. The Federal Reserve's upcoming policy decisions could alter the outlook for real yields, a key driver of gold demand. The Jackson Hole speech by Fed Chair Kevin Warsh is expected to provide further guidance, especially after July's meeting minutes revealed the widest policy split among Fed officials in two decades. A more hawkish stance could pressure gold if real yields rise.
Deutsche Bank's revised target is about 3% above current gold prices, which stood near $4,650 per ounce on August 25. This modest upside follows a year of significant volatility, with gold swinging nearly 30% from peak to trough. The bank's call reflects cautious optimism that the worst of the correction has passed, but it does not signal a new bull market. Investors should monitor central bank activity and policy developments, as these factors will likely determine whether gold can sustain elevated levels.
Gold's performance is shaped by the interplay of interest rates, inflation expectations, and investor sentiment. When real yields fall or turn negative, gold's role as a store of value becomes more attractive. However, the metal's lack of yield means it remains sensitive to shifts in monetary policy and inflation outlooks. Understanding these dynamics is essential for investors considering gold as part of a diversified portfolio, particularly in an environment of active government intervention and heightened market uncertainty.
