By Barani Krishnan

Investing.com – Gold posted its first weekly loss in three, but bullion’s defenders held defiantly at around the mid-$1,800 level as Friday’s trade dwindled to a close — despite a break below the key psychological level earlier in the day.

The only day gold settled higher this week was the one, and the four other days were in the red. It is an indication that the rally that started in the penultimate month of October has reached its exhaustion point.

However, the crowd fighting for bullion’s spot price and front-month Comex futures in New York, at the $1,850 mark, suggested that there were chances of yellow metal rebounding next week.

“Gold is stuck in a broadening formation and that should remain the case given next week’s shortened trading week,” said Ed Moya, analyst at online trading platform OANDA.

“Inflation and Fed speak are the primary catalyst for gold and right now traders will need to see what happens over the next couple of weeks before having strong conviction on assessing what the Fed will do regarding interest rates,” added Moya.

U.S. gold futures’ most active contract, , settled Friday’s trade down $9.80, or 0.5%, at $1,851.60 an ounce. The previous session’s low was $1,843.60. It fell almost 1% over the past week.

Even though swings were below $1,850, December gold also reached a 5-week high of nearly $1,880. This boosts the confidence of bullish market participants that yellow metal may still reach $1,900 due to the U.S. Inflation theme.

​​Bullion has always been touted as an inflation hedge. But it wasn’t able to live up to that billing earlier this year as intense speculation that the Federal Reserve will be forced in a faster-than-expected rate hike had sent Treasury yields and the dollar rallying instead, at bullion’s expense.

The trend has slowed somewhat since Fed Chair Jay Powell, earlier this month, assured that any rate increase that comes after the second half of next year will not be a surprise.

Last week, the Labor Department reported that the U.S. Consumer Price Index (which measures a range of products including gasoline, health care, groceries, and rents) rose 6.2% in the past year. The CPI grew at the fastest pace since November 1990. This acceleration was driven largely by fuel prices that have been running at highs for seven years.

The, which is a crucial indicator of real interest rates has seen three-week highs over 1.6%, and a peak 16 months above 96 since then. This would normally have meant that gold was doomed. However, the threat to gold has been largely averted this time.