(Reuters) – Gold prices surged 2% to their highest in more than five years on Thursday after the U.S. Federal Reserve signalled possible interest rate cuts later this year, sending the dollar lower and U.S. Treasury yields plunging.

Spot gold was up 1.7% at $1,382.70 per ounce as of 0657 GMT, after hitting its highest since March 17, 2014 at $1,386.38.

U.S. gold futures jumped 2.8% to $1,386.30 an ounce, after touching their highest since April 2018 at $1,397.70.

The Fed on Wednesday said it was ready to battle growing global and domestic economic risks with interest rate cuts beginning as early as next month, as it took stock of rising trade tensions and growing concerns about weak inflation.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

“The weakness in the dollar seen due to the rate cut expectations and a lot of short-covering due to the sudden jump in prices are behind the sharp move,” said Benjamin Lu, an analyst with Phillip Futures, adding that some of the weaker stop losses were taken out.

“With this move, the target for gold investors has moved to $1,400 and the key is to sustain this momentum for this week. On the longer term, it is going to be difficult to stay above $1,400 as with better conditions for riskier assets due to rate cuts, investors might move to equities.”

Even as the U.S. central bank left its benchmark interest rate unchanged for now, the shift in sentiment since its last policy meeting weighed on the dollar and U.S. Treasury yields.

“Gold has taken a nice leg up” on the back of falling yields and dollar, said Chris Weston, head of research at Melbourne-based foreign exchange brokerage Pepperstone.

“The question now is if there is going to be a 50 basis point cut in July, which could take gold into $1,400.”

Meanwhile, gold priced in Australian dollars surpassed A$2,000 for the first time, hitting a record high of A$2007.82.

Gold prices have gained more than $80 so far this month.

“It is a completely momentum trade out here… There is a big emotional situation out here with gold trading at multi-year highs, which brings the fear of missing (factor). Gold is rallying in every currency and that for me is a truly bullish market,” Weston added.

Spot gold may gain more to $1,404 per ounce, as it has cleared a resistance at $1,371, according to Reuters technical analyst Wang Tao.

Other precious metals also rose, with silver gaining 1.1% to $15.31 per ounce, its highest in nearly three months, while platinum climbed 0.6% to $815.84 per ounce.

Palladium rose 1.1% to $1,517.05 per ounce, its highest in 12 weeks.