Futures & Commodities

Gold surges after Fed removes 'patient' from statement

Why gold is still the preferred asset class

Gold prices jumped on Wednesday, after the Federal Reserve dropped the word "patience" from its policy statement, stoking expectations for a mid-year rise in U.S. interest rates.

As the global investment community focused its attention on the U.S. central bank, the Fed Open Market Committee lived up to expectations: It dropped the word "patient" from its post-meeting statement, an indication, subtle though it may be, that the era of zero interest rates is about to end.

Spot gold was up 2.1 percent to $1,172.30 an ounce, above its lowest since Nov. 7 at $1,142.86, hit on Tuesday.

U.S. gold futures for April delivery settled up 0.3 percent at $1,151.30 an ounce.

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"We have a bearish view, especially longer term, as the global economy is incrementally improving and growth risks are reduced, which means that there are simply fewer reasons to buy gold as a safe haven," said Norbert Ruecker, Julius Baer's head of commodity research.

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The dollar was down 0.4 percent against a basket of currencies, while European shares rose, though Wall Street traded lower.

Gold, a non-interest yielding asset, has dropped 3 percent since the start of the year on expectations for a U.S. rate rise.

While the U.S. economy has been strengthening, as evidenced by a firming labor market, the housing sector remained weak, suggesting that the Fed is unlikely to engage in an aggressive rate-rise cycle after an initial increase.

Data on Tuesday showed that U.S. housing starts plunged to their lowest level in a year in February.

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.4 percent to 747.98 metric tons on Tuesday.

CNBC contributed to this report.