Gold surges over 3% as US Treasury announcement hurts yields, dollar

"This was totally unexpected. Very bullish for gold due to lower yields on longer-dated Treasuries and as it may help to bring the dollar lower," said Robert Gottlieb, an industry expert and former head of precious metals at Koch Supply and Trading.

TD Securities said in a note that the Treasury's announcement that it is increasing the size of liquidity support buyback operations has given metals a "jolt of life."

The note added: "While the fierce bid has faded in recent days, the (gold investment) 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."

"Several" Fed officials were prepared to raise rates at the July 28-29 meeting, and "many" said further hikes may be needed if inflation fails to return to the central bank's 2% target, minutes showed.

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