By Barani Krishnan

Investing.com – Gold bulls pulled back Wednesday from $1,900 support for the yellow metal following unrelenting dollar highs that recalled pandemic-era peak levels.

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.

In the five past weeks the greenback has grown in strength due to expectations that the Federal Reserve will increase rates by a double-digit percentage starting May. 

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. This brought the key lending rates down to 0.25% or 0.5%. 

Since March, many FOMC members concluded that the March rate hike had been too timid to stop inflation from reaching 40-year highs. Most economists now expect a 50-basis-point or 50% rate hike when the next rate decision is made in May.

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.”