Gold prices surged on Wednesday as the dollar fell sharply in response to the Federal Reserve’s decision on Tuesday to cut the main US policy interest rate to a historic low in a range between zero and 0.25 per cent.

Gold rose 1.6 per cent to $870 a troy ounce, moving between a low of $848.50 and a peak of $881.20, the highest level since October 10 when bullion touched $931.