December gold dropped $6 an ounce after news that the US Federal Reserve will launch a third round of quantitative easing, only to shoot up $20 moments later. By the close the precious metal had settled at $1,767, up almost $34 an ounce since the start of trading on Thursday.
Gold hit an intra-day high of $1.775 shortly before the end of the trading day – a 7-month high and up $240 from its 2012 lows struck in May.
The Federal Open Market Committee announced it will start buying $40 billion of agency mortgage-backed securities each month from this Friday as part of its latest effort to increase the pace of the US recovery.
Unlike earlier rounds, QE3 is open-ended and the US monetary authorities would only halt the program if they are satisfied with the recovery in US jobs and economic growth.
The Fed also decided to extend near-zero interest rates until the middle of 2015 is keeping in place 'Operation Twist' first started in September last year.
The first two round of quantitative easing have been a massive boon for the yellow metal.
The price of gold had almost doubled on the back of QE1 which kicked off in December 2008 and QE2 which was first mooted in August 2010.
Before QE1 the Fed's total assets were below $1 trillion. It is now closer to $3 trillion.