Gold climbs as dollar falls ahead of Fed minutes

FRANKFURT (Aug 20) Gold prices climbed on Tuesday as the dollar fell against a basket of currencies, pressured by uncertainty ahead of the release of minutes of the Federal Reserve's July meeting on Wednesday.

News from the Fed is being closely watched for clues on the outlook for U.S. monetary policy, a key driver of gold prices, as speculation mounts that the bank may taper its $85 billion monthly bond-buying program from as early as September.

Spot gold was up 0.7 percent to $1,375, having previously hit a session low at $1,352.20, while U.S. gold futures for December delivery rose 0.7 percent to $1,375 an ounce.

"In the end everybody is looking to the next FOMC minutes on Wednesday," said Tobias Merath, head of commodity research at Credit Suisse. "The Fed might sound rather dovish in the minutes, and that would be bullish for gold."

The dollar index fell 0.5 percent, tracking a drop in U.S. Treasury yields and as investors chose safe haven currencies over the dollar in the uncertainty ahead of the release of the Fed minutes.

Rising expectations that the Fed will start to scale back monetary stimulus measures next month pushed European shares to a two-week low, while the Euro STOXX 50 Volatility Index surged 10.5 percent, highlighting uncertainty over the near-term outlook for financial markets.

Prices for U.S. Treasurys rose on Tuesday after a recent slump left yields at two-year highs, with investors dumping riskier assets around the world to scoop up relatively cheap U.S. government debt.