Treasury Liquidity Support Announcement Boosts Gold Prices

Gold prices surged over 3% to their highest in two-and-a-half months on Wednesday, driven by a surprise liquidity support announcement from the U.S. Treasury. The move knocked down bond yields and the dollar ahead of the release of the Federal Reserve's July meeting minutes.

The spot gold price climbed 3.6% to $4,487.91 per ounce by 2:10 p.m. EDT (1810 GMT), with U.S. gold futures settling 2.8% higher at $4,545.30. Gold broke above its 100-day moving average of around $4,381.

Industry expert Robert Gottlieb said the announcement was 'totally unexpected' and 'very bullish for gold due to lower yields on longer-dated Treasuries and as it may help to bring the dollar lower.' The U.S. dollar index fell 0.8%, making dollar-priced gold less expensive for holders of other currencies.

The Treasury's announcement was a surprise, with several Fed officials prepared to raise rates at the July 28-29 meeting, but expectations that the Fed will hold rates steady at its September 15-16 meeting stand at 65% after recent weak U.S. economic data dampened bets for a hike.

Other precious metals also rose, with spot silver rallying nearly 4% to $65.8 per ounce, platinum rising 5.1% to $1,800.02, and palladium advancing 2.7% to $1,325.12.