Gold briefly breaks $1,300, highest since May 3

A casting mold filled with molten gold sits above a melting vat during the manufacture of gold ingots at the Suzdal gold mine, operated by Nordgold NV, in Semey, Kazakhstan.
Andrey Rudakov | Bloomberg | Getty Images

Gold hit the psychologically key level of $1,300 an ounce Wednesday as the Federal Reserve announced it would leave interest rates unchanged at its June meeting.

Gold futures for August delivery briefly traded at $1,300 an ounce, the highest since it hit $1,303.90 on May 3, and last traded up $6.90 at $1,295.20 an ounce. Spot gold hit $1,291.91, up 0.54 percent.

Gold mining companies were also bolstered after the Fed statement, with a fund that tracks the industry rising more than 4 percent, after Fed chair Janet Yellen shared remarks.

What's driving gold prices higher?
What's driving gold prices higher?

Gold hit the six-week high after climbing for the sixth straight session when the Federal Reserve lowered its economic growth forecasts through 2017, indicating it will be less aggressive in tightening monetary policy next year.

Following a two-day meeting, the Fed kept said it kept interest rates unchanged as expected but signaled it still plans two rate increases this year, saying it expects the U.S. job market to strengthen after a recent slowdown. The U.S. dollar extended losses against a basket of currencies while global stock markets briefly added to gains.

U.S. gold futures for August delivery settled up 20 cents an ounce at $1,288.30 prior to the Fed statement.

"What does elevate an eyebrow is the Fed has tempered its longer term growth outlook with 2018's Fed Funds median target dropping 62 basis points," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

Gold higher if Brexit happens: Gartman
Gold higher if Brexit happens: Gartman

Gold has rallied cautiously on the news and would disappoint if it does not re-test highs of the move above $1,300 soon with yields and dollar lower."

The metal is highly sensitive to U.S. interest rates, increases in which lift the opportunity cost of holding non-yielding gold and boost the dollar, in which gold is priced.

"With regards to the dot plot, the median of FOMC participants still see two hikes occurring in 2016, however now six participants see only one hike this year as opposed to only one in March," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto. Mendes said they do not expect a rate hike until September.

Bullion already rallied for the prior five sessions as assets seen as higher risk, such as shares, saw heavy losses on concerns about Britain's possible exit from the European Union, commonly referred to as Brexit. Yields on safe-haven German Bunds fell below zero for the first time.

Gold priced in sterling turned higher after the Fed statement, rising 0.4 percent a nearly three-year peak.

On Tuesday, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to the highest since October 2013.

Among other precious metals, silver futures were up 0.61 percent at $17.53 an ounce, platinum futures were up 0.6 percent at $978 an ounce and palladium futures were 0.5 percent lower at $533.10 an ounce.