Why are gold stocks surging ~10%
Treasury Secretary Scott Bessent lit a fire under gold and gold equities overnight, announcing that the US Treasury would at least double the size of its long-dated bond buybacks from US$2bn to US$4bn per operation, targeting 10-, 20- and 30-year maturities.
The message was clear: with long-end yields approaching two-decade highs, Treasury is prepared to push back against the bond sellers. Markets responded immediately, with the 30-year yield falling ~10bp and the 10-year ~6bp as investors interpreted the move as something of a “whatever it takes” moment for US borrowing costs.
- MM believes this is a pivotal moment for bonds and, by definition, the US$ and gold.
Gold was an obvious beneficiary. Lower long-term real yields reduce the opportunity cost of holding gold, while Treasury’s willingness to intervene in the bond market has also revived concerns around the longer-term value of the US dollar.
The combination of lower real yields and a weaker US$ dollar was rocket fuel for gold, and the leverage quickly flowed through to the miners: all 21 ASX 200 gold names finished higher today, with an average gain of almost 9%.
- MM remains bullish gold stocks, now seeing at least 10-20% more upside, an even more positive outlook than 24-hours ago!
