Gold (XAUUSD) price rose toward $4,540 on Friday as the U.S. Treasury prepared to increase purchases of longer-dated bonds. Treasury Secretary Scott Bessent said that the buybacks could increase in excess of $4 billion. That could help to ease pressure on the long term yields and lower borrowing costs. The drop in the yields supports the gold outlook as they make it less costly to maintain a non-yielding asset. The policy signal could also help to boost demand for silver (XAGUSD), which tends to follow the gold price with any major precious metals rally.
But the energy induced inflation still remains the main risk for both metals. The increase in energy prices may help maintain inflation at a higher level and provide a reason for the Federal Reserve to further increase rates. There is a 36.2% chance of the rate hike during the next meeting, compared to 45% a month ago. The easing expectations of the rate hike during the next meeting have supported the gold and silver prices for now. But the increase in these expectations again may limit the gold and silver rally. Gold could perform well if investors look for inflation protection while silver could face pressure if the higher rates reduce industrial activity.