Gold returns to $2,000 as dollar descends into post-Fed abyss

By Barani Krishnan

Investing.com - The dollar is falling into a post-Fed abyss and gold is making the most of it.

The yellow metal returned to $2,000 an ounce on Thursday as gold for April delivery settled at $1,995.90 per ounce on New York’s Comex, up $46.30, or 2.4%, on the day. The benchmark gold futures contract hit a session high of just above $2,001, in pursuit of Monday’s one-year high of almost $2,015.

The spot price of gold, more closely followed than futures by some traders, was at $1,999.09 by 14:00 ET (18:00 GMT), up $29.43, or 1.5%. Spot gold hit a session high of $1,995.28.

“We are regaining energy to advance towards $2010, which would be the first stop in spot gold after this,” said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.

Gold regained upward momentum after a two-day slide as the Dollar Index, which pits the U.S. currency against a basket of six competing majors that include the euro and the yen, continued its journey south after mixed messaging on the outlook for rates by the Federal Reserve.

The Fed raised rates by another quarter point as expected on Wednesday at its March meeting, reiterating its commitment to bringing down inflation and not cutting rates at least for this year.

But in the wake of the U.S. banking crisis that had jolted financial markets over the past two weeks, the central bank also hinted at a potential pause in its hike cycle, triggering speculation that it might do just one more hike.

The Fed has raised rates nine times altogether over the past 12 months, adding 475 basis points to rates, which were slashed to just 25 basis points in the aftermath of the coronavirus pandemic which broke out in March 2020. A pause in Fed hikes could spell doom for the dollar and be hugely positive for gold, which is a contrarian trade to the U.S. currency.

“Gold is becoming a favorite trade on Wall Street as many traders remain nervous post-Fed and over how quickly will U.S. authorities be able to contain further banking turmoil,” said Ed Moya, analyst at online trading platform OANDA.

“Gold is going to shine here and it seems positioned to find a home above the $2,000 level. A run to record territory is not that far away and could happen if financial stability concerns do not ease.”