$Gold Futures(APR4) (GCmain.US)$ teases record-highs in electronic trading Wednesday

Gold showed little reaction in the immediate aftermath of the U.S. Federal Reserve's decision Wednesday afternoon to leave interest rates unchanged and maintain its forecast of three rate cuts this year. Then prices for the precious metal rallied toward fresh record highs.

The Fed kept its benchmark rate unchanged at a range of 5.25%-5.5%, as expected, but the markets "let out big sighs of relief that the expected rate cuts for this year didn't fall from three to two," said Brien Lundin, editor of Gold Newsletter.

The issue now is if those three cuts, which were well below investors' expectations at the beginning of the year, will now be "compressed into a shorter period of time," he said. "This will exacerbate their effect."

In electronic trading Wednesday afternoon, April gold was at $2,185.10 an ounce. The all-time settlement record high for a most-active contract was set on March 11 at $2,188.60, while the intraday record stands at $2,203 from March 8.

The most active gold futures contract had climbed by $1.30, or nearly 0.1%, to settle at $2,161 an ounce on Comex Wednesday.

"Gold prices are rising as expectations of real interest rates are falling, increasing the relative attractiveness of non-yielding assets like gold," said Will Rhind, chief executive officer and founder of GraniteShares, which runs the GraniteShares Gold Trust BAR.

With expectations of yields falling, and the market at or near all-time highs, "investors have been looking at assets like gold with renewed interest to diversify portfolios," he told MarketWatch. "Investors holding cash on the sidelines may be tempted back into the market if yields drop later this year, and gold could provide an outlet for those concerned about equity market valuations."

Meanwhile, the timing of expected rate reductions "virtually guarantees cuts close to the presidential election, perhaps raising doubts in some quarters as to the Fed's impartiality," Gold Newsletter's Lundin said. "The repercussions from that would likely be felt later, if there's a change in the White House."