Gold jumps about 3% on weaker dollar, lower bond yields

Gold surged 3% to its highest price in more than two and a half months on Wednesday as a drop in the U.S. dollar and bond yields boosted the appeal of non-yielding bullion ahead of the release of the minutes from the Federal Reserve's July 28-29 policy meeting.

Spot gold was up 2.7% to $4,448.97 per ounce by 9:37 a.m. EDT (1337 GMT) after touching its highest level since June 5 at $4,466.01 earlier in the session. U.S. gold futures increased nearly 2% to $4,506.70.

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On the technical front, spot gold broke above its 100-day moving average of around $4,381. "We've seen the odds of a Fed raising interest rates at the September meeting drop dramatically over the course of the last several sessions. As a result, that has been putting pressure on the dollar and supporting the gold market," said David Meger, director of metals trading at High Ridge Futures.

The U.S. dollar index fell 0.6%, making dollar-priced gold less expensive for holders of other currencies and boosting the precious metal's appeal. Yields on 30-year U.S. Treasuries fell sharply on Wednesday from around their highest level in 19 years. TD Securities said in a note the U.S. Treasury's announcement that it is increasing the size of liquidity support buyback operations has given metals a "jolt of life."

"While the fierce bid has faded in recent days, the flows could quickly return amid Treasury liquidity support, a Fed willing to look through an energy shock, and a growing stagflation narrative, which should all ultimately see lower real rates," the TD Securities note said.

Expectations that the Fed will hold rates steady at its September 15-16 meeting stand at 65%, according to CME Group's FedWatch Tool, after recent weak U.S. economic data dampened bets for a hike.

Among other metals, spot silver rallied 2.7% to $65.01 per ounce, platinum edged up 3.2% to $1,766.55 and palladium advanced 2.3% to $1,319.03.