Gold surged over 3 percent to its highest in over two-and-a-half months on Wednesday after a surprise liquidity support announcement by the U.S. Treasury knocked down bond yields and the dollar ahead of the release of the Federal Reserve's July meeting minutes.

Spot gold climbed 3.6 percent to $4,487.91 per ounce by 2:10 p.m. EDT (1810 GMT) after touching its highest level since June 4 at $4,499.20 earlier in the session. U.S. gold futures settled 2.8 percenthigher at $4,545.30.

On the technical front, spot gold broke above its 100-day moving average of around $4,381.

"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.

The U.S. dollar index fell 0.8 percent, making dollar-priced gold less expensive for holders of other currencies.

Yields on 30-year U.S. Treasuries fell sharply on Wednesday from around their highest level in 19 years after the U.S. Treasury Department said it would double the size of liquidity support buyback operations for longer-dated bonds.

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 (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," the TD Securities note said.

"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 percent target, minutes showed.

Expectations that the Fed will hold rates steady at its September 15-16 meeting stand at 65 percent, 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 nearly 4 percent to $65.8 per ounce, platinum rose 5.1 percent to $1,800.02 and palladium advanced 2.7 percent to $1,325.12.

All four precious metals were on track to log their biggest daily rise in two weeks.