Gold Surges as Dollar Weakens and Buyers Step In on Dips

Gold hit a two-week high on Wednesday (22nd), driven primarily by a weakening U.S. dollar and technical buying. Meanwhile, markets remain under pressure from Middle East tensions and await further signals on the Federal Reserve's (Fed) interest rate outlook.

Spot gold surged 1.7%, closing at $4,145.24 per ounce, after briefly touching $4,165.87 earlier in the session—the highest level since July 7.

August-delivery gold futures rose 1.9%, settling at $4,151.90 per ounce.

"Gold continues to explode, breaking above $4,140, supported by a weaker dollar and dip-buying that has injected fresh momentum into the bulls," said Lukman Otunuga, Senior Research Analyst at FXTM.

However, Otunuga added, "Underlying bearish fundamentals still cap upside momentum, especially with oil prices rising over 3% earlier today."

The U.S. dollar index declined on Wednesday, making dollar-denominated gold cheaper for overseas buyers.

U.S. Secretary of State Marco Rubio stated on Wednesday that Washington is open to negotiations to end the Iranian crisis, but Iran is not taking talks seriously.

Four oil tankers carrying Saudi Arabian crude oil bound for Asia turned back in the Red Sea on Wednesday after being threatened by the Iran-backed Yemeni Houthi movement (Houthis), sending oil prices to a nearly six-week high.

Rising oil prices due to supply disruptions in the Persian Gulf have been weighing on gold prices, as higher oil prices reinforce expectations of higher interest rates, making non-yielding assets like gold less attractive.

A Reuters survey shows analysts expect the Fed to hold rates steady this year, but to raise rates twice by the end of March next year.

The CME Group's FedWatch tool indicates traders are pricing in about a 76% chance of a Fed rate hike in September.

Investors are awaiting the Federal Open Market Committee (FOMC) meeting next week, hoping to gain more clues on the monetary policy stance.

Other precious metals trading:

- Spot silver rose 2% to $59.98 per ounce. - Spot platinum gained 0.7% to $1,640.63 per ounce. - Spot palladium climbed 1.4% to $1,299.47 per ounce.