Gold up around 3% on Fed move

Gold soared around 3% on Wednesday after the US 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.

"Gold is rallying as the Fed is not exiting its stimulus programme. 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% and the Thomson-Reuters CRB index also up nearly 1%.

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

Spot gold was up 2.9% to $1,446.74 an ounce by 2:18 p.m. EDT (1818 GMT). It rebounded about $45 or 3% from a six-week low at $1,291.34 earlier in the session.

US Comex gold futures for December settled down $1.80 an ounce at $1,307.60 prior to the Fed statement, with trading volume at about 20% above its 30-day average, preliminary Reuters data showed.

Among other precious metals, silver rose 3.5% to $22.43 an ounce. Platinum was up 0.9% to $1,429.85 an ounce, while palladium dropped 0.4% to $700.35 an ounce.