Gold jumps more than 4% as weaker dollar and economic data boost prices

Gold prices surged during Wednesday's trading as the US dollar weakened and Treasury yields declined, while investors continued to monitor developments in the Middle East for fresh clues on the outlook for inflation and interest rates.

In trading, spot gold climbed 4.3% to $4,252.74 per ounce after touching its highest level since June 22 earlier in the session.

US gold futures also advanced 3.7% to $4,305.20 per ounce.

The US dollar hovered near a three-month low against the Japanese yen, making dollar-denominated gold cheaper for buyers using other currencies. Meanwhile, the yield on the benchmark 10-year US Treasury note remained close to its lowest level in a week.

Labor market data

On the economic front, the ADP employment report showed that the US private sector added just 44,000 jobs in July, well below economists' expectations of 70,000.

Meanwhile, Kansas City Federal Reserve President Jeff Schmid said additional monetary tightening may be needed to bring elevated inflation back to the central bank's 2% target.

Minneapolis Federal Reserve President Neel Kashkari also told CNBC that the time had come to begin raising interest rates gradually.

According to the CME FedWatch tool, markets are currently pricing in about a 57% probability of a Federal Reserve interest rate hike at its September meeting.

Higher interest rates typically weigh on gold because the precious metal does not generate any yield.

The latest figures come ahead of Friday's closely watched US nonfarm payrolls report, which is expected to provide a clearer picture of the strength of the US labor market.

At the same time, comments from US President Donald Trump, who said his administration had held "very good" talks with Iran, reinforced expectations that an agreement to end the five-month conflict in the region could be reached soon.