Gold hits three-month high as investor demand surges

Gold continued its upward trajectory in early trading on Tuesday, reaching its highest level in more than three months, supported by growing demand for the precious metal as investors await US inflation data and remarks from Federal Reserve Chair Kevin Warsh for new signals on monetary policy direction.

Spot gold rose 0.4% to $4,668.19 an ounce by 01:46 GMT, after hitting its highest level since May 14 earlier in the session. US gold futures also climbed 0.6% to $4,724.50 an ounce.

Bond buybacks boost gold's appeal

Gold's strong gains followed an announcement last week by the US Treasury Department that it plans to double the size of long-term bond buybacks to support liquidity in the bond market.

The announcement raised concerns about a weakening dollar, which in turn boosted demand for gold as investors seek a hedge against currency depreciation and rising inflation.

In a note, TD Securities said concerns over a weaker dollar are expected to support gold in the coming weeks, especially as the Federal Reserve has yet to signal a clear readiness to address rising inflation.

Gold is widely seen as a hedge against inflation, but higher interest rates can limit its appeal by increasing the cost of holding the non-yielding metal compared to assets that generate returns.

Markets await Fed chair's speech

Investors are closely watching Federal Reserve Chair Kevin Warsh's first speech at the annual Jackson Hole symposium this week, with keen interest in any indications about future monetary policy direction.

Traders and analysts are monitoring Warsh's remarks for signals on the recent rise in bond yields, as well as for reassurances of the US central bank's independence from President Donald Trump's administration.

The significance of the Fed chair's comments is heightened by the upcoming release of the US personal consumption expenditures report on Wednesday, the central bank's preferred measure of inflation.

Iran adds geopolitical uncertainty

On the geopolitical front, markets are watching the impact of expanded US economic sanctions on Iran, after Tehran vowed to respond to new measures Washington says are aimed at cutting off funding sources for the Iranian economy.

In response, Iran expressed confidence in its main trading partners' ability to withstand US pressure, adding a new layer of uncertainty to the geopolitical landscape and global markets.

Precious metals extend gains

Gains extended to other precious metals, with spot silver rising 0.3% to $69.16 an ounce.

Platinum also climbed 0.4% to $1,883.93 an ounce, while palladium rose 0.2% to $1,359.