Investing.com -- Gold surged amid a weaker dollar and muted U.S. inflationary gains last month, ahead of the release of the Federal Open Market Committee's minutes from its July meeting on Wednesday afternoon.
Gold for December delivery traded in a broad range between $1,115.50 and $1,129.10 a troy ounce before settling at $1.128.50, up 11.60 or 1.04%. At one point, gold futures reached its highest level in nearly a month. The precious metal is still down more than 4% since the start of the summer when it peaked at above $1,200 an ounce in late-June.
Gold likely gained support at $1,089, the low from August 10 and was met with resistance at $1,146.30, the high from July 17.
On Wednesday morning, the U.S. Bureau of Labor Statistics (BLS) said its Consumer Price Index (CPI) for the month of July ticked up 0.1%, following solid gains of 0.3% and 0.4% in June and May respectively. A modest gain in apparel prices failed to offset declines in electricity and auto prices. Airfare prices also weighed on the July CPI, after plunging 5.6% -- its sharpest monthly drop in two decades. Analysts expected the July CPI to increase 0.2% on a monthly basis. The BLS' headline inflation reading also increased 0.2% on a year-over-year basis, after posting a yearly gain of 0.1% in June.
The Core CPI, which strips out food and energy prices, also inched up 0.1% from its June level, below expectations for a 0.2% monthly gain. Over the last 12 months, the core reading has increased 1.8% after remaining unchanged from June. The Federal Reserve has indicated that it could raise short-term interest rates for the first time in nearly a decade when it is "reasonably confident" that long-term inflation is moving toward its targeted goal of 2%. Long-term inflation has failed to reach the Fed's annual 2% target for every month over the last three years.
Investors will look for further indications from the Fed of a September interest rate hike on Wednesday afternoon when the FOMC releases the minutes from its July Monetary Policy meeting. Although the FOMC said in its July monetary statement that it had seen signs of a strengthening U.S. economy as temporary headwinds receded, it was still looking for "further improvement in the labor market," before it raises rates. In July, U.S. non-farm payrolls increased by 215,000, slightly above forecasts for a 212,000 gain, while the unemployment rate remained at 5.3% in line with economists' expectations.
Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in rising rate environments.
Broad economic changes since the FOMC last met, however, could provide dovish members of the Fed with ammunition to plead their case for a delayed rate hike. On Wednesday, U.S. crude futures dipped below $41 barrel to touch down to a six and a half year low. In addition, the People's Bank of China rattled global markets last week by devaluing the yuan by nearly 2%.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.15% to an intraday low of 96.70, before rising slightly to 96.84 in U.S. afternoon trading.
Silver for September delivery soared 0.465 or 3.14% to 15.250 an ounce.
Copper for September delivery fell 0.012 or 0.52% to 2.275 a pound.