Gold futures rose in aftermarket trading on Wednesday after the Federal Reserve slashed its key interest rate by 50 basis points to 3 percent which boosted the precious metal's appeal as a safe haven for investment.

As an inflationary move, the Fed cut its benchmark federal funds rate by a widely expected half percentage point, after cutting the rate last week by three-quarters of a percentage point. The Fed made the cut in a bid to stave off a U.S. recession.

Before the Fed decision, gold ended in the red at $926.30 an ounce in regular trading, down $4.50.

Minutes after the Fed decision, gold for April delivery surged $4.70 to $935.50 an ounce in after market trading on the New York Mercantile Exchange.

Gold for April delivery rose as high as $941.70 an ounce in electronic trading on the New York Mercantile Exchange, hitting a new record high. The contract was previously up $8.80 at $939.60 an ounce.

The Federal Reserve's 50 basis points rate cut sets the stage for a further rally in gold, but the upside target remains near $940 and probably not much beyond $950 at the moment, said Jon Nadler, an analyst at Kitco Bullion Dealers.

Conditions are becoming overbought, and South African production problems have been addressed for the time being, Nadler said.

March silver also rose 10 cents to $16.90 an ounce on the Nymex, while March copper was down 2.95 cents to $3.2695 a pound.

The Fed remains behind the curve, having to cut in a hurried series, instead of a well-orchestrated cycle of adjustments that should have been initiated when the credit problem first emerged, Nadler added. There is the risk of over-accommodating, and inflation also remains a threat.