Gold settles at $1,307, surges after Fed statement

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Gold futures settled lower, while spot gold soared nearly 3 percent on Wednesday after the Federal Reserve said it would continue buying bonds at an $85 billion monthly pace for now, surprising financial markets that were braced for a reduction in the central bank's economic stimulus.

Citing strains in the economy from tight fiscal policy and higher mortgage rates, the Fed decided against the tapering of asset purchases that investors had all but priced into stock and bond markets.

Schiff: Whatever Fed does good for gold

"Gold is rallying as the Fed is not exiting its stimulus program. We are going to have cheap money and low interest rates for a long time," said Axel Merk, portfolio manager of California-based Merk Funds, which has around $500 million in currency mutual-fund assets.

After the Fed announcement, gold's gains far outpaced other markets, with the S&P 500 equities index around up 1 percent and the Thomson-Reuters CRB index also up nearly 1 percent.

The metal is a traditional hedge against inflation and economic uncertainty brought by central-bank actions.

Spot gold was last up 2.9 percent to $1,346 an ounce. It rebounded about $45 or 3 percent from a six-week low at $1,291.34 earlier in the session. for December delivery settled $1.80 lower at $1,307.60 an ounce prior to the Fed statement, with trading volume at about 20 percent above its 30-day average, preliminary Reuters data showed.

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—By Reuters.