Gold jumped to a six-month high near $1,770 (U.S.) an ounce on Thursday, rising 2 per cent after the U.S. Federal Reserve launched an aggressive stimulus program and vowed it will keep buying assets until the outlook for jobs improves substantially.
The metal received a huge boost after the U.S. central bank tied its unconventional bond-buying directly to economic conditions, marking a significant shift in the direction of U.S. monetary policy.
Market watchers said the Fed was essentially shifting its focus to maximum employment at the expense of maintaining stable prices. The two objectives are often called the Fed's dual mandate.
"They are emphasizing the growth mandate, and that means they don't care about inflation other than giving lip service to it," said Axel Merk, chief investment officer at Merk Funds, which has around $600 million in currency mutual-fund assets.
"The price of gold will do very well in the years to come," Merk said.
Spot gold jumped 2 percent to $1,766.40 an ounce as of 1:58 p.m. ET after hitting a high of $1,772.11, within striking distance of a 2012 high of $1,790, set on Feb. 29.
U.S. gold futures for December delivery settled up $38.40 at $1,772.10 an ounce in very heavy volume.
The metal also benefited after the Fed said it would not likely raise interest rates from current rock-bottom lows until at least mid-2015. Previously, it had set such guidance at late 2014.
Year-to-date, gold is up 13 per cent following a 10 percent rally since the start of August as central banks around the world appeared more determined to take up further stimulus to aid a frail global economy.
That is still below the 15 per cent gain seen early this year after the Fed said in January it would keep interest rates near zero through late 2014. Doubts about additional quantitative easing, or printing money to buy government bonds, had decreased bullion's appeal as an inflation hedge.
However, doubts remain about the likely efficacy of such a move. Reuters data shows that asset performance tended to diminish with each new round of previous QE, and it sometimes takes as long as a year for the effects of Fed action to kick in.
Among other precious metals, silver was up 3.6 per cent at $34.46 an ounce. Spot platinum rose 2.8 per cent to $1,682.49 an ounce, while spot palladium climbed 2.9 percent to $690.20.