Emergency Bond Intervention Sends Gold & Silver Soaring

You beat me! I was wondering what caused it to jump so high!

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Hello, dear friends. My name is Clive Thompson and today is Wednesday, August 19th, 2026. It’s coming up to 7:00 p.m. here in Europe by the time I publish this.

This afternoon the gold price jumped by over $100 in 90 minutes. You can see it on the screen behind me, and it’s still over $100 up at the moment. The rise came immediately after the US Treasury released an announcement on its website. I’ll read the beginning of that announcement:

“The US Department of the Treasury is increasing by at least double the size of liquidity support buyback operations for longer-dated nominal coupon securities — the 10-year to 20-year sector and the 20-year to 30-year sector. The current minimum size of $2 billion per operation will be at least $4 billion per operation. This change is effective September 9th and will be in effect for the remainder of this refunding period through to November 4th, 2026.”

As they made that announcement, gold shot up, as you can see on the screen. I’m going to interpret it because it’s difficult for many people to understand. They talk in a language that is not really made for the layman.

This is not the first time they have made an announcement like this. On the 13th of August, six days ago, the Treasury had already doubled the frequency of long-end liquidity support operations from two per quarter to four per quarter, and they lifted the total liquidity buyback capacity from $30 billion to $38 billion. So in the space of six days the Treasury has doubled how often it buys long bonds and doubled how much it can buy each time.

Just before the announcement today, the 30-year yield was at 5.34%, the highest yield in 20 years. Immediately after the announcement the yield fell back a little.

The Federal Reserve is standing still. It has done nothing and said nothing. It is not riding to the rescue. In fact, on the 13th of August the New York Fed announced that it would buy nothing at all between the 14th of August and the 14th of September — a whole month. We are in the middle of that month and it is sticking to what it said.

So what’s going on? On the fiscal side the Treasury is intervening in the long end, trying to keep long yields from rising any further. The Federal Reserve still has its hands in its pockets and is doing nothing. This probably means the Treasury has some unofficial line in the sand where it regards the 30-year yield as too high. I’m suggesting that level may be anything above 5.30%. We were just above 5.3% when they made this announcement. The Treasury has not stated where it thinks yields are too high, so this is speculation, but 5.3% looks like the level they are reacting to.

As the Treasury buys these longer-dated bonds it has to fund those purchases from somewhere. It is almost certainly going to fund them from the short end of the market — the Treasury bill market (around 3 months) or the Treasury note market (around 2 years). Yields at the short end are sitting in the high threes to the low fours, below 5%.

At first sight you might think the Treasury is refinancing at a lower rate than the 30-year. It is not quite working like that, because most of this refinancing of long-dated debt will be maturing debt that was taken out when yields were 2.5% or 3%. They will retire that debt, but any new debt they take on will have to be at rates in the high threes to low fours for the next few weeks at least.

The next logical step is fuller yield curve control. To get full yield curve control you need the Fed to do it. The Treasury cannot do it alone. Real yield curve control means the central bank — the Federal Reserve — stands ready to buy unlimited quantities of long-dated debt at a target yield, let’s call it 5.3%. The Treasury can do a limited amount by shifting funding to the short end, but it cannot do it in unlimited size. Only the Fed can.

Right now the Fed is walking the other way. It is not buying long-dated bonds. For the yield curve control thesis to play out, the Fed would have to reverse the position it announced just six days ago. Don’t forget we have a chairman who wants the balance sheet to get smaller, and a committee where three members were actually dissenting in favour of a hike.

A reversal of the Fed’s stance is possible, but not according to their current words, at least not in the near term for the next 30 days or so. If the Fed does eventually join in — and that would probably come after the 14th of September if they stick to their word — it would buy long-dated bonds with new money that it creates.

This is why the gold price has risen so much today. The market is now anticipating exactly that endgame: that at some point the Federal Reserve will step in to help the government by buying long-dated bonds to keep yields under control, and simultaneously printing money to buy those bonds. That is quantitative easing. It creates a lot of new money, and that money will find its way into other things — primarily assets that are in demand and relatively scarce. That could include the stock market, gold, works of art and other tangible stores of value. Gold is one of the easiest places for people to redeploy cash when they see a surge of new money coming into the system.

This is still speculation. It has not happened yet. But it is what the market thinks is likely to happen.

Behind me you can see the spike in the gold price. As I speak, just coming up to 7 o’clock, it is pushing up around $4,494, having peaked a few minutes ago near $4,498.40.

All eyes are now on September 14th–15th, when the Fed’s hold on buying new Treasuries comes to an end. Will they start buying Treasuries on that date? If they do, the gold price will go ballistic in my opinion.

That’s all I’ve got to say to you today, ladies and gentlemen. Thank you very much. Please like and subscribe if you want me to keep you abreast of developments as they happen in the gold market, the Treasury market, and of course if the federal funds interest rate gets changed at any time. Thanks very much and bye-bye now.

Yup, that was another good analysis, better in fact. I think Mario is right, the bond bull market is over.

"Absent real fiscal consolidation, we fear the markets will view this action as lacking credibility," strategists including Jay Barry wrote in a note. "This could contribute to higher term premium and yields over time should Treasury become more opportunistic in its approach to debt management and move further away from its 'regular and predictable' tenet."

It went sideways since this for a few days but it seems to be headed back up.