Gold Bounces-off 1,820, Upsides Could Restart

The US Treasury Yields, on a benchmark 10-year note, also slipped, coming in at 1.71% during early trading hours on Wednesday. However, yields managed to find support and reversed their course to close its session with minor gains at 1.75%. The Dollar and Yield both retreated, due to the release of the latest Consumer Price Index data. Although the data came in favor of the currency, it was not surprising, as markets had already predicted the same, and even this move has already been priced, which ultimately dragged the dollar to the downside, as investors started booking profits.

On the data front, the CPI figures released at 18:30 GMT showed a surge to 0.5%, against the anticipated 0.4%, supporting the US dollar. The Core CPI also surged, coming in at 0.6%, against the projected 0.5%, which boosted the US dollar.

In 2020, the US economy contracted by 3.5%, due to the lockdowns and other disruptions caused by the COVID-19 crisis. However, in its latest projections, the Central Bank has projected a growth of about 5.5% in 2021 and 4% for 2022. The main issue faced by the Federal Reserve is the inflation running at the highest levels in four decades, as the prices of almost everything have surged, due to the higher wage demand andthe disrupted supply chain caused by the pandemic-induced lockdowns.

Gold always declines after news of an interest rate hike; however, if the inflation remains strong through 2022, gold could push higher, to its  record highs of 2020, above $2,100. The worries about increased prices will raise the safe-haven demand, and it will eventually have a negative impact on the US dollar, as the United States has spent trillions of dollars on pandemic relief, which was the cause of the price pressures.