Gold rose to one-week highs on Thursday, extending the previous session's 4.2 percent rally, lifted by technical buying and short-covering a day after the U.S. Federal Reserve's unexpected decision to continue buying bonds.

On Wednesday, Fed Chairman Ben Bernanke did not commit to reducing the bond purchases this year, and instead went out of his way to stress the program was "not on a preset course." In June he had said the Fed expected to cut back before year end. 

"The expectation of no Fed tapering and low interest rates for the rest of the year is a big plus for gold," said Bill O'Neill, partner of commodities investment firm LOGIC Advisors.

Spot gold hit its highest level since Sept. 10 at $1,374.54. It last traded at $1,368.46 an ounce, up 0.3 percent by 3:41 p.m. EDT (1941 GMT).

U.S. gold futures for December delivery settled up $61.70 at $1,369.30, with trading volume at about 15 percent above its 30-day average, preliminary Reuters data showed.

Total open interest in Comex gold futures fell 701 to 383,891 lots on Wednesday, suggesting the post-Fed rally was driven by investors who bought back previously bearish bets, analysts said.

Gold, often seen as an inflation hedge and safe-haven investment, has outperformed U.S. equities and other assets since the Fed announcement. Many economists expected a $10 billion reduction in the central bank's $85 billion monthly bond purchases.

Gold has lost some 18 percent of its value this year after the Fed signaled it would start reining in its monetary stimulus, which could indicate the end to ultra-loose monetary policy.

TECHNICAL OUTLOOK IMPROVING

On charts, gold's rally left it some $20 above its 100-day moving average, a key technical support.

Gold could rally to its 200-day moving average near $1,475 an ounce, as Wednesday's rise signaled a bullish trend reversal after bullion broke below a upward trend line connecting its lows on June 28 and Aug. 7, said Rick Bensignor, head of trading strategy at Wells Fargo.

Another analyst said bullion could be near its lows after Wednesday's rally.

"The shorter-term moving averages have started rising, suggesting gold is in the process of bottoming," said Adam Sarhan, chief executive of Sarhan Capital.

Analysts say they are watching for signs that the Fed's announcement is boosting inflows into gold-backed exchange-traded funds, as such moves will signal rekindled fund interest in gold as a hedge. 

Among other precious metals, silver rose 1.2 percent to $23.15 an ounce, having rallied around 6.5 percent on Wednesday, its biggest one-day gain since November 2008.

Platinum was down 0.3 percent at $1,458.80, while palladium rose 1.9 percent to $730.59 an ounce.

(By Frank Tang and Clara Denina; Additional reporting by Jan Harvey in London. Editing by Andre Grenon)