By Barani Krishnan

Investing.com — One week — that’s all it took for gold’s $2,000 highs to melt.

In Monday’s session, an ounce of the yellow metal on New York’s Comex was back to trading in $1,800 territory. 

This came as the dollar flew on expectations the Federal Reserve would adopt a 50-basis point, or half percentage point, hike at its May policy meeting next week — double the 25 bps, or quarter point, approved in March in the first pandemic-era U.S. rate increase. 

By 10:18 AM ET, Comex’s was down $35.85, or 1.9%, at $1,898.45 an ounce. The six-week peak of June gold was $2,003 and this occurred on April 18. This is due to concerns about the possibility that America could fall into recession as a result of aggressive Fed inflation control measures. Gold is often used as an insurance against political and economic troubles. 

A succession of Fed speakers had soothed some market worries over the past week that the economy could turn negative from the central bank’s attempts to put a lid on price pressures growing at their fastest pace in 40 years. 

Although fears about a difficult landing haven’t completely vanished, some pessimists are now more optimistic, particularly over the sterling labor force market. That has sent the dollar — the chief beneficiary of a rate hike — rallying instead, making gold and other safe-havens suffer.

In Monday’s session, the , which pits the U.S. currency against six major rivals, hit a 25-month high of 101.745.

The yield on U.S. bonds, which are often side-by-side to the dollar, has been decoupled from the greenback in recent times. For the third consecutive day, the yield fell almost 4%.