Risk appetite has reignited after the US Federal Reserve chose to keep its asset buying program at full throttle, shocking investors across the globe.
Wall Street surged to a record high following the Fed decision, sparking strong rallies on global sharemarkets, while the US dollar and Treasury yields went into a tailspin.
Australia's sharemarket soared to five-year highs, with the benchmark S&P/ASX 200 Index rising 57.36 points, or 1.1 per cent, to 5295.5. As the greenback weakened, the Australian dollar punched through US95¢, while gold jumped more than 4.6 per cent to $US1364.11 an ounce.
Investors were expecting the Fed to start lopping off $US10 billion of its $US85 billion monthly stimulus, which would have strengthened the US dollar and pushed down the price of gold.
But Fed chairman Ben Bernanke said unemployment was still too high and inflation too low to begin any tapering, which economists are tipping will begin in December or early next year under Mr Bernanke's most likely replacement Janet Yellen. But even then, Ms Yellen, who has been a strong supporter of the stimulus strategy, is expected to slowly unwind the program if she takes the helm.
Gold stocks were the big winners on the ASX, with nine gold miners in the index's top 10 performing companies. Perseus Mining and St Barbara led the charge, rising 22.5 per cent and 20.2 per cent to 68¢ and 65.5¢ respectively, while Medusa rose 18.5 per cent to $2.43 and Beadell Resources firmed 17.6 per cent to 87¢.
Among the big iron ore miners BHP Billiton gained 1.6 per cent to $36.68 while Rio Tinto jumped 3.1 per cent to $63.63, respectively as metals prices soared overnight.
St George Bank chief economist Besa Deda said the market was "caught" by the Fed's decision.
Arab Bank Australia Treasury dealer David Scutt said he was surprised the market held onto its early gains. "But look the Fed is probably going to be printing for the rest of this year and maybe into 2014," Mr Scutt said.
However, stocks with large exposure to the US market fell.
Packaging company Amcor shed 1.6 per cent to $10.60 and QBE Insurance lost 1.4 per cent to 21¢.
Ten-year US Treasury yields tumbled 16 basis points to 2.7 per cent, to the delight of India, Indonesia and other emerging markets. A rise in Treasury yields recently, which would have continued if the Fed began tapering, has made it harder for emerging economies to pay their debts.