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The U.S. Dollar Index hit a 20-year high yesterday (Thursday) with a peak of 104.80 creating a very strong window to buy for those able to move quickly to buy gold.

With gold striding towards record new highs throughout the last few months, the expert advice is to buy the dips when and where they occur; advice that should be heeded today as prices have slipped by 1.7%, taking the precious metal to £1,495 ($1,822).

Edward Moya, the senior market analyst at foreign exchange form OANDA said, “Right now, Treasury yields and the stock market are both declining, which should suggest we are getting close to a capitulation with this de-risking moment on Wall Street.”

Commerzbank analyst Daniel Briesemann adds, “Inflation will probably remain higher than before the pandemic because wage costs for example are rising sharply due to the tight labour market. The Fed thus remains under pressure to raise interest rates significantly. Our economists expect rate hikes of 50 basis points at each of the Fed’s next three meetings. The key rate is likely to reach 3.0% by the end of the year.”

CIBC Capital Market strategist Bipan Ri confirms that the dollar strength won’t continue indefinitely explaining, “We still envisage that markets will reassess where the terminal interest rate for the Fed is being priced, which should leave the USD on the defensive a bit as other majors play catch up.” 

On that note, don’t expect this window to buy to remain open for long, as the Federal Reserve struggles to get inflation under control, COVID lockdowns continue in China, the war in Ukraine rumbles on and the spectre of a recession looms larger with each passing week – all factors highly supportive of large gains for gold.

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