By Barani Krishnan
Investing.com — Gold bulls backed off on Wednesday from the $1,900 support line for the yellow metal after unrelenting highs in the dollar, which revisited pandemic-era peaks.
The , which pits the U.S. currency against six major rivals, soared to 103.29, its highest since the March 2020 peak of 103.96.
The greenback has gone from strength to strength over the past five weeks on expectations that the Federal Reserve will double down on rate hikes from May onward.
In Wednesday’s session, Comex’s settled down $15.40, or 0.8%, at $1,888.70 an ounce.
After slashing interest rates to virtually zero at the start of the pandemic, the Fed’s policy-making Federal Open Market Committee, or FOMC, approved the first pandemic-era rate hike on March 16, raising rates by 25 basis points, or a quarter point. That brought key lending rates to between 0.25% and 0.5%.
Many FOMC members have concluded since that the March hike was too tame to rein in inflation galloping at 40-year highs. Economists are almost certain now of a 50-basis point, or half-percentage point, hike at the next rate decision on May 4.
The dollar’s run-up has blighted the rally in gold, which rose to a one-month high of $2,003 last week before suddenly reversing.
“It’s been a strange month for gold which rallied towards $2,000 on seemingly little before plunging back below $1,900 on very little as well,” said Craig Erlam, analyst at online trading platform OANDA.
Erlam noted that the yellow metal’s progress in April had left it not far from March levels. “I find it very hard to believe that the appetite for gold is waning given the immense uncertainty and inflationary pressures that still exist. A break below $1,880 may suggest otherwise.”