Gold prices edged lower on Tuesday but remained close to their highest level in more than three months, supported by a weaker U.S. dollar and the Treasury’s plans to expand its bond buyback program.

Spot gold slipped 0.1% to $4,647.05 per ounce, holding near its highest level since mid-May. The precious metal has gained more than 15% so far this month and is on track for its strongest monthly performance since September 1999, according to UOB.

U.S. gold futures were little changed at $4,694.50, also trading near a three-month high.

Gold has benefited from weakness in the U.S. dollar, with the dollar index down around 0.8% this month. A softer dollar makes gold cheaper for buyers using other currencies and can strengthen demand for the precious metal.

Treasury yields have remained elevated through much of August, but the U.S. government's bond buyback plans have helped limit further increases. Yields are down around 3 basis points this month. Lower yields tend to support gold by reducing the opportunity cost of holding non-yielding assets.

Attention is now turning to Federal Reserve Chair Kevin Warsh's upcoming speech ahead of the Jackson Hole Symposium later this week. Investors will be watching closely for signals on the direction of U.S. interest rates and the Fed's broader policy outlook.

A more hawkish message from Warsh could put pressure on the recent gold rally by reviving expectations for tighter monetary policy. However, Citi said a dovish surprise could provide another strong catalyst for gold, particularly if markets further reduce expectations for Fed rate hikes.

Such an outcome could also bring renewed attention to concerns surrounding Fed independence, the sustainability of U.S. government debt and the longer-term outlook for the dollar, factors that have helped strengthen demand for gold as an alternative store of value.

With gold already up more than 15% this month, Jackson Hole could provide the next major test for whether the rally can extend beyond its recent three-month highs.

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