By Barani Krishnan

Investing.com – Gold prices increased 2% last week, giving longs the first win in five weekly games.

While they may have secured a break from their gloom which began in mid-April, bulls in bullion still appeared to be on a knife’s edge given the dollar’s potential to reprise 20-year highs, analysts cautioned.

With its striking contrast to gold fashion, the, which measures the greenback against six major currencies and posted its first week-end decline in six. At Friday’s level of 103.23, the index wasn’t too far from the week-ago peak of 105.06, which marked a high since 2000.

The yields on bonds are another issue that can be a problem with gold.

Based on speculation that the Federal Reserve would cap future U.S. rates at one-half of the previously-speculated three-quarter-point rate, the benchmark 10-year U.S. Treasury Note yield has fallen to 2.79%. Yields can still jump as rate expectations are often changing on the fly.

“The second half of the week has been kind to gold as the trepidation in financial markets has shifted slightly from the pace of monetary tightening to recession risks,” said Craig Erlam, analyst at online trading platform OANDA. “So rather than higher yields and a stronger dollar weighing on the yellow metal, we’ve seen investors pouring into safe havens which have lowered yields slightly and lifted gold.”

Comex closed at $1,842.10 an ounce. This was a 90-cent increase, less than 0.1% on the previous day. The week-to-date, however, June gold rose almost $34 (or 1.9%).

Futures of yellow metal plunged to $1,875, their lowest point since Jan. 28, when it was $1,779.70.

Erlam stated that it was difficult to predict whether gold will continue its rebound given the expectation of Fed hikes in the future.

“Whether that will be sustained in this hiking environment will be interesting and ultimately depend on just how real and significant the economic fears are,” he said. “At the end of the day, rate hikes should lower demand but so should a recession. If the latter continues to be viewed as a likely outcome of the former, gold could see its fortunes improve further.”