Gold soars on weak dollar, fed announcement

Investing.com - Gold futures moved sharply higher on Wednesday,  as the Federal Reserve pledged to hold its target for the federal funds rate at zero to 0.25% for a "highly accommodative" monetary policy.     

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1707.05 a troy ounce during late U.S. trade soaring 2.56%.  

Gold futures were likely to find support at USD1645.15 a troy ounce, Friday's low and technical resistance exists at USD1681.65 a troy ounce, the high of January 23.  

Weakness in the U.S. dollar worked to lift precious metal prices.  The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, fell 0.30% to trade at 79.75.  

Interestingly, gold's correlation with the euro/dollar exchange rate is at its most positive in nearly 2 years. This means that gold is more likely to move in synch with the euro than at any other time since January 2010.  

The Fed had pledged to keep its target rate in place until mid 2013. However, it has now moved this date until late 2014 resulting in the greenback's weakness and gold's bullish move.    

Greece continues to lead the bearish worries in the euro zone. Yesterday, hopes were dashed of a last minute bond deal to avoid default when officials rejected a final offer.  

Reports of the European Central Bank being opposed to restructuring its Greek holdings added to the risk adverse gold positive sentiment of the session.  

Meanwhile, the start of India's wedding season last week, where gold is a traditional gift, increased bullishness in the precious metal.  

Elsewhere on the Comex, silver for March settlement gained 3.78% to trade at USD33.18 a troy ounce, while March copper futures surged 1.01% to trade at USD3.84 a pound.