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[GCCV1  Loading...      ()   ] prices surged $50 to settle above $1700 an ounce in the final hour of the open outcry session at the NYMEX, after the Federal Reserve said it will not raise rates until late 2014.

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"It's being read as a pseudo-QE3 [quantitative easing ] as the Fed continues to keep rates low," says NYMEX floor broker Anthony Neglia of Tower Trading. "It's a 'risk-on trade, a perception of the government to ease and gold being a bet that this upward move will continue."

RBC Capital Markets precious metals analyst George Gero describe it as a "breathtaking rally", spurred by traders covered short positions ahead of Thursday's expiration of NYMEX February gold options contracts.

Neglia notes that fresh buyers also appeared to come in toward the end of the session. February gold futures expire next week. April gold futures are the next most active contract.

Sharon Epperson
CNBC Senior
Commodities
Correspondent &
Personal Finance
Correspondent

"This is a reversal from this morning when the traders worried about the euro, worried about Greece and sold ahead of next Tuesday's first notice day when margins become full money to ensure making and or taking delivery or rolling over [futures] to another month," Gero says. "Recently the roll over has increased open interest in December 2012, June 2012, and December 2013 — all of which is positive for gold and the metals complex."

Neglia also notes there was considerably strong "upside" call buying in June gold options with strike prices of $1900 an ounce and higher during Wednesday's session.

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